Easily the most significant issue numerous people have with Bankruptcy is without a doubt ‘Will I manage to retain my home?’ and it can be complicated, but occasionally it is attainable.
The only good reason where you will be required to sell your family house when you declare bankruptcy is if you have equity in the home so that it is thought as an asset. But exactly how does this work? What is equity? How much equity makes it an asset? We receive the questions constantly about Bankruptcy. So below are a few examples to demonstrate to you how all of it works and help you comprehend Bankruptcy. Remember if you wish to know more regarding Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Darwin on 1300 795 575, or check out our website: www.bankruptcyexpertsdarwin.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they relocated there for their job during the mining boom and so prices were higher, and life seemed good. However recently the work has dried up, prices have dropped and their financial debt has just kept growing. Now they are needing to take a look at Bankruptcy because of significant liabilities and home mortgage.
They purchased the house for $450,000, and they have $80,000 in various other unpaid debts.
They really would like to keep their home but wonder if they can. They know that house prices, if anything, have declined in the area in the last 5 years so to be safe they believe that their home is currently only worth $450,000 after all these years. To make sure they researched www.realestate.com.au sold category of the site to see what various other properties in the streets nearby have sold for recently.
Over the past 5 years they have only been paying off the interest, so they still owe the initial $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
As there is no equity within this specific residential property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, so long as they maintain the mortgage payments then all will be well for them for the 3 years they remain in personal bankruptcy.
At the end of the insolvency time period the trustee will write to them and inquire if they want to take control of ownership of their house again and provided that it has not increased in price over the 3 years they have been insolvent they will be requested to make an offer to get their house back. This is typically somewhere around $3,000 and $5,000 to pay for the legal expenses of modifying the land title deed etc. This was a rather simple scenario to demonstrate how a house may be considered by a trustee when there is no equity involved.
Case Study 2. (Bill & Michelle Johnson).
2 years ago Bill and Michelle bought a townhouse in a nice suburb of Darwin for $850,000. They tipped in $50,000 as a down payment 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 complication Bill is about $240,000 in the red. Michelle who does work in banking has a separate job and no other financial debts besides the mortgage. Bill can not pay out his financial debts so he is having a look at Bankruptcy. Michelle is worried that she too may have to file for bankruptcy or be driven into it due to the house loan.
Here in this specific case the trustee is required to gain access to or get their hands on Bill’s half of the equity which is $50,000 less marketing fees. They might carry this out in a few ways; 1. Have them sell off the home. 2. Invite Michelle to purchase Bills half of the equity. 3. keep them in the home – but it’s quite unlikely with this case that the trustee will be happy to leave Bill and Michelle in the home as there is just too much equity.
So Michelle might have the capability to buy 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 home.
Property and Bankruptcy in Australia is difficult to understand and tricky. These two examples above are simply the tip of the iceberg as far as your options in Darwin are concerned. If you need to know more about Bankruptcy and residential properties don’t hesitate to contact us here at Bankruptcy Experts Darwin on 1300 795 575, or take a look at our website: www.bankruptcyexpertsdarwin.com.au.