The biggest concern people have when they
come to our team about Bankruptcy is usually 'Can I keep my house?' and in many
cases the truth is yes, you can keep your house.
The only reason you can be compelled to
sell your family home when you declare bankruptcy is actually because you have
so much equity in the house that it is regarded as an asset. Please read
through these basic hypothetical case studies below to get your head around Bankruptcy
and how it has an effect on houses in Australia. Remember If you have to know
more regarding Bankruptcy and houses feel free to contact us here at Bankruptcy
Experts Darwin on 1300 795 575, or head to our website: www.bankruptcyexpertsDarwin.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 since
they have massive 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 lately.
Having said that 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 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 wish to take over ownership of their
house again and provided that 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 usually somewhere between $3,000 and $5,000 to cover the legal
costs of altering the land title deed etc.
Now let's have a look at a slightly
different example of Bankruptcy and houses.
Case Study 2. (Bill & Michelle
Johnson).
2 years ago Bill and Michelle purchased a
townhouse in a great suburb of Darwin 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 failure
Bill is about $240,000 in debt. Michelle who works in banking has a separate
job and no other debt other than the mortgage. Bill cannot pay his debts so he
is considering Bankruptcy. Michelle is concerned that she too may need to file
for bankruptcy or be driven into it due to the house loan.
Within this particular case the trustee is
required to access or get their hands on Bill's part of the equity which is
$50,000 less selling costs. They may 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 improbable in this 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 be able 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 demanding, these two case studies above are just the tip of the
iceberg as far as your options in Darwin are concerned. If you need to know
more about Bankruptcy and houses feel free to call us here at Bankruptcy
Experts Darwin on 1300 795 575, or head to our website: www.bankruptcyexpertsDarwin.com.au.
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