Easily the most significant issue numerous people have with Bankruptcy is without a doubt ‘Can I manage to retain my home?’ and it might be complicated, but sometimes it is achievable.
The only justification where you will be obliged to sell your family home when you declare insolvency is if you have equity in the home so that it is looked as an asset. But how does this work? What is equity? Just how much equity makes it an asset? We receive the problems all the time about Bankruptcy. So below are a few good examples to show you how it all works and help you learn about Bankruptcy. Remember if you want to know more relating to Bankruptcy and houses do not hesitate to get in contact with us here at Bankruptcy Experts Cairns on 1300 795 575, or check out our website: www.bankruptcyexpertscairns.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya purchased a house in a mining town, they relocated there for work during the mining boom and so prices were high, and life looked great. 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 due to substantial financial obligations and home mortgage.
They purchased the home for $450,000, and they have $80,000 in additional unpaid debts.
They really wish to keep their home but question if they can. They know that residential property prices, if anything, have decreased in the town in the last 5 years so to be safe they think that their house is at present only worth $450,000 after all these years. To make sure they searched www.realestate.com.au sold category of the website to see what other homes in the streets nearby have sold for most recently.
Over the past 5 years they have just been paying off the interest, so they currently owe the original $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
Considering that there is no equity in this particular property the trustee will not ask Tanya and Matt to sell their home when they declare bankruptcy, so long as they maintain the mortgage payments then all will be well for them for the 3 years they are in bankruptcy.
By the end of the insolvency amount of time the trustee will write to them and ask if they want to take over ownership of their property 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 have their house back. This is typically somewhere around $3,000 and $5,000 to cover the legal expenses of changing the land title deed etc. This was a pretty simple example to show 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 residential area of Cairns 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.
Because of a recent business problem Bill is about $240,000 in debt. Michelle who does work in banking has a different job and no other debt apart from the mortgage. Bill can not pay his debts so he is taking a look at Bankruptcy. Michelle is concerned that she too may have to file for bankruptcy or be driven into it as a result of the home loan.
Within this particular instance the trustee is required to gain access to or get their hands on Bill’s share of the equity which is $50,000 less marketing fees. These professionals could carry this out in a couple of ways; 1. Have them sell the house. 2. Welcome Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s quite improbable in this instance that the trustee will be happy to keep Bill and Michelle in the home since there is just a lot of equity.
So Michelle may have the ability to buy Bill’s share of the equity by coming up with $50,000 and buying out Bills’ fifty percent and from that time its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is challenging and tricky. These two examples 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 do not hesitate to get in touch with us here at Bankruptcy Experts Cairns on 1300 795 575, or take a look at our website: www.bankruptcyexpertscairns.com.au.