The leading question people have when they
come to us about Bankruptcy is undoubtedly 'Can I keep my house?' and in many
cases the answer is yes, you can keep your house.
The only reason you will be driven to sell
your family home when you file for bankruptcy is because you have a lot of
equity in the home that it is regarded as an asset. Please read these
straightforward hypothetical case studies below to get your head around Bankruptcy
and how it has an effect on houses in Australia. Remember If you need to know
more regarding Bankruptcy and houses feel free to contact us here at Bankruptcy
Experts Cairns on 1300 795 575, or head to our website:
www.bankruptcyexpertsCairns.com.au
Case Study 1. (Mike & Sue Smith).
5 years ago Mike and Sue bought a house in
a mining town for $450,000. At this time the mining boom was keeping 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 nearby have sold for lately.
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 property
the trustee will not ask Mike and Sue to sell their property when they go
bankrupt, as long as they keep up the mortgage payments then all will be well
for them for the 3 years they are in bankruptcy.
At the end of the bankruptcy period the
trustee will write to them and ask if they want to take over ownership of their
house again and provided that it has not grown 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 normally somewhere between $3,000 and $5,000 to cover the legal
costs of modifying the land title deed etc.
Now let's take a 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 great suburb of Cairns 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.
Due to a recent business problem Bill is
about $240,000 in debt. Michelle who works in banking has a separate job and no
other debt aside from the mortgage. Bill cannot pay his debts therefore he is
considering Bankruptcy. Michelle is concerned that she too may need to declare
bankruptcy or be pushed into it as a result of the house loan.
Within 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 can do this in a few ways; 1. Have them sell
the home. 2. Invite Michelle to buy Bills half of the equity. 3. leave them in
the home - but It's very unlikely 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
confusing and demanding, these two case studies above are just the tip of the
iceberg as far as your options in Cairns are concerned. If you need to know
more about Bankruptcy and houses feel free to contact us here at Bankruptcy
Experts Cairns on 1300 795 575, or go to our website:
www.bankruptcyexpertsCairns.com.au.
No comments:
Post a Comment