Losing your house: How much do you understand about Bankruptcy in Maitland?

The leading concern a lot of people have when they come to us regarding Bankruptcy is simply 'Can I keep my house?' and in some cases the truth is yes, you can manage to keep your house.

The only reason you are going to be compelled to sell your family home when you file for bankruptcy is actually because you have a lot of equity in the house that it is deemed an asset. Please check out these basic hypothetical case studies below to get your head around Bankruptcy and how it impacts houses in Australia. Remember If you want to know more about Bankruptcy and houses feel free to call us here at Bankruptcy Experts Maitland on 1300 795 575, or head to our website: www.bankruptcyexpertsMaitland.com.au

Case Study 1. (Mike & Sue Smith).

5 years ago Mike and Sue purchased a house in a mining town for $450,000. At this time the mining boom was helping keep all the property prices nice and high. Now they are needing to look at Bankruptcy because they have substantial debts of $80,000 on top of their mortgage and credit card and tax debt.

They really want to keep their house but wonder if they can, they know that house prices if anything have gone down in the area in the last 5 years so to be safe they think that their home is currently only worth $450,000 after all these years, to make sure they searched www.realestate.com.au/ sold section of the website to see what other homes in the streets close by have sold for recently.

Unfortunately they have not paid any principal of the home loan over the last 5 years, mainly just interest, so they still owe $450,000.

Current House Value = $450,000.

Current Mortgage Value = $450,000.

Net Equity Value = $0.

Because there is no equity in this particular property the trustee will not ask Mike and Sue to sell their house when they go bankrupt, as long as they keep up the mortgage payments then all will be well for these people for the 3 years they are in bankruptcy.

At the end of the bankruptcy period of time the trustee will write to them and ask if they wish to take over ownership of their house again and so long as it has not increased in price over the 3 years they have been bankrupt they will be asked to make an offer to have their house back. This is typically somewhere between $3,000 and $5,000 to cover the legal costs of changing the land title deed etc.

Now let's look at a slightly different example of Bankruptcy and houses.

Case Study 2. (Bill & Michelle Johnson).

2 years ago Bill and Michelle bought a townhouse in a nice suburb of Maitland for $850,000 they tipped in $50,000 as a deposit and now the townhouse two years later is worth $900,000.

Current House Value = $900,000.

Current Mortgage Value = $800,000.

Net Equity Value = $100,000.

As a result of a recent business failing Bill is about $240,000 in debt. Michelle who does work in banking has a separate job and no other debt except for the mortgage. Bill cannot pay his debts so he is looking into Bankruptcy. Michelle is worried that she too may need to file for bankruptcy or be obliged into it as a result of the house loan.

In this particular case the trustee is required to access or get their hands on Bill's half of the equity which is $50,000 less selling costs. They might do this in a few ways; 1. Make them sell the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in the home - but It's very improbable in this particular case that the trustee would be happy to leave Bill and Michelle in the house because there is just too much equity.

So Michelle may have the chance to purchase Bill's share of the equity by coming up with $50,000 and buying out Bills' half and from that moment its now 100 % Michelle's house.

Property and Bankruptcy in Australia is challenging and complicated, these two case studies above are just the tip of the iceberg as far as your options in Maitland are concerned. If you need to know more about Bankruptcy and houses feel free to get in touch with us here at Bankruptcy Experts Maitland on 1300 795 575, or check out our website: www.bankruptcyexpertsMaitland.com.au.