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 attainable.
The only good reason where you will be required to sell your family house when you declare insolvency is if you have equity in the home so that it is considered an asset. But exactly how does this work? What is equity? Just how much equity can make it an asset? We get the inquiries constantly about Bankruptcy. So here are a few scenarios to show you how it all works and really help you comprehend Bankruptcy. Remember if you wish to know more concerning Bankruptcy and residential properties don’t hesitate to get in contact with us here at Bankruptcy Experts Alice Springs on 1300 795 575, or check out our website: www.bankruptcyexpertsalicesprings.com.au
Case Study 1. (Tanya & Matt).
5 years ago Matt and Tanya bought a house in a mining town, they moved there for work during the mining boom therefore prices were higher, and life looked great. However in recent times 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 as a result of substantial financial debts and mortgage.
They purchased the house for $450,000, and they have $80,000 in other unpaid debts.
They definitely would like to keep their house but wonder if they can. They know that residential property prices, if anything, have gone down in the area in the last 5 years so to be safe they think that their house is currently only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold section of the website to see what various other properties in the streets nearby have sold for lately.
Over the past 5 years they have only been paying off the interest, so they still owe the original $450,000.
Current House Value = $450,000.
Current Mortgage Value = $450,000.
Net Equity Value = $0.
As there is no equity in this particular property the trustee will not ask Tanya and Matt to sell their house when they go bankrupt, provided that they keep up the mortgage payments then all will be well for them for the 3 years they are in bankruptcy.
By the end of the bankruptcy period of time the trustee will contact them and inquire if they wish to take over ownership of their home again and provided that it has not grown in price over the 3 years they have been bankrupt they will be requested to make an offer to get their house back. This is generally somewhere between $3,000 and $5,000 to cover the legal costs of changing the land title deed etc. This was a rather simple scenario 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 suburb of Alice Springs for $850,000. They tipped in $50,000 as a down payment and now the townhouse two years later is valued at $900,000.
Current House Value = $900,000.
Current Mortgage Value = $800,000.
Net Equity Value = $100,000.
Due to a recent business issue Bill is about $240,000 in the red. Michelle who carries out work in banking has a separate job and no other debt besides the mortgage. Bill can not pay out his debts so he is having a look at Bankruptcy. Michelle is concerned that she too may need to file for bankruptcy or be driven into it as a result of the house loan.
In this specific situation the trustee is required to gain access to or get their hands on Bill’s half of the equity which is $50,000 less selling costs. They might accomplish this in a few ways; 1. Have them sell off the house. 2. Welcome Michelle to buy Bills half of the equity. 3. keep them in the house – but it’s quite unlikely with this scenario that the trustee would be happy to leave Bill and Michelle in the home since there is simply a lot of equity.
So Michelle might have the capacity to acquire Bill’s share of the equity by coming up with $50,000 and buying out Bills’ half and from that time its now 100 % Michelle’s property.
Property and Bankruptcy in Australia is difficult to understand and tricky. These two case studies above are just the tip of the iceberg as far as your options in Alice Springs are concerned. If you must know much more about Bankruptcy and residential properties feel free to contact us here at Bankruptcy Experts Alice Springs on 1300 795 575, or check out our website: www.bankruptcyexpertsalicesprings.com.au.