The greatest concern a lot of people have
when they come to our company about Bankruptcy is usually 'Can I manage to keep
my house?' and in many cases the truth is yes, you can keep your house.
The only reason you will likely be
compelled to sell your family home if you file for bankruptcy is because you
have so much equity in the house that it is viewed as an asset. Please go over
these simple 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 about Bankruptcy and houses feel free to contact us here at Bankruptcy
Advice Hobart on 1300 879 867, or go to our website:
www.bankruptcy-advice.com.au/Hobart.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 keeping all the
property prices nice and high. Now they are needing to look at Bankruptcy
considering they have massive debts of $80,000 on top of their mortgage and
credit card and tax debt.
They really wish 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 house is still
only worth $450,000 after all these years, to be sure they searched
www.realestate.com.au/ sold section of the website to see what other homes in
the streets nearby 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 as 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 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 lovely suburb of Hobart 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 failing Bill is
about $240,000 in debt. Michelle who does work in banking has a separate job
and no other debt apart from the mortgage. Bill cannot pay his debts so he is
looking at Bankruptcy. Michelle is bothered that she too may need to declare
bankruptcy or be obliged into it as a result of the house loan.
With 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 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 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 capable 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 Hobart are concerned. If you need to know
more about Bankruptcy and houses feel free to consult with us here at
Bankruptcy Advice Hobart on 1300 879 867, or check out our website:
www.bankruptcy-advice.com.au/Hobart.com.au.
