Losing your home: How much do you know of Bankruptcy in Sydney?
The most considerable concern many have with Bankruptcy is without a doubt ‘Can I manage to keep my house?’ and it might be complicated, but occasionally it is possible.
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 exactly how does this work? What is equity? How much equity can make it an asset? We get the problems all the time about Bankruptcy. So here are a few instances to demonstrate to you how all of it works and help you learn about Bankruptcy. Keep in mind if you wish to know more concerning Bankruptcy and residential properties feel free to get in touch with us here at Bankruptcy Experts Sydney on 1300 795 575, or check out our website: www.bankruptcyexpertssydney.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 and so prices were high, and life seemed great. Having said that in recent years the work has dried up, prices have gone down and their financial debt has just kept increasing. Now they are having to take a look at Bankruptcy due to substantial personal debts and mortgage.
They bought the house for $450,000, and they have $80,000 in various other unpaid debts.
They really want to keep their home but wonder if they could. They know that house prices, if anything, have decreased in the region in the last 5 years so to be safe they think that their home is presently only worth $450,000 after all these years. To make sure they browsed www.realestate.com.au sold section of the site to see what various other properties in the streets nearby have sold for lately.
Over the past 5 years they have just 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.
Because there is no equity within this particular residential property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, so long as they maintain the mortgage repayments then all will be well for them for the 3 years they remain in bankruptcy.
By the end of the bankruptcy time period the trustee will write to them and ask if they wish to take control of ownership of their property again and provided that it has not grown in price over the 3 years they have been insolvent they will be asked to make an offer to get their house back. This is generally somewhere between $3,000 and $5,000 to pay for the legal fees of changing the land title deed etc. This was a pretty basic scenario to demonstrate how a home 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 Sydney 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 complication Bill is about $240,000 in debt. Michelle who carries out work in banking has a different job and no other personal debts apart from the home mortgage. Bill can not pay his financial debts so he is taking a look at 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 situation the trustee is required to access or get their hands on Bill’s half of the equity which is $50,000 less selling expenses. They could carry this out in a couple of 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 very improbable in this case that the trustee will be happy to leave Bill and Michelle in the home considering that there is simply a lot of equity.
So Michelle might have the capacity to buy Bill’s percentage of the equity by coming up with $50,000 and buying out Bills’ half and from that time its now 100 % Michelle’s house.
Property and Bankruptcy in Australia is complex and complicated. These two examples above are simply the tip of the iceberg as far as your options in Sydney are concerned. If you need to know much more about Bankruptcy and residential properties do not hesitate to get in touch with us here at Bankruptcy Experts Sydney on 1300 795 575, or take a look at our website: www.bankruptcyexpertssydney.com.au.