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Losing your house: How much do you know of Bankruptcy in Canberra?

Easily the most considerable issue many have with Bankruptcy is without a doubt ‘Will I manage to keep my home?’ and it might be complicated, but sometimes it is attainable.

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The only good reason where you will be required to sell your family residence 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 makes it an asset? We get the questions frequently about Bankruptcy. So below are a few instances to show you how everything works and really help you understand Bankruptcy. Remember if you want to know more concerning Bankruptcy and houses feel free to get in touch with us here at Bankruptcy Experts Canberra on 1300 795 575, or check out our website:

Case Study 1. (Tanya & Matt).

5 years ago Matt and Tanya bought a house in a mining town, they moved there for their job during the mining boom therefore prices were higher, and life appeared great. However in recent years the work has dried up, prices have dropped and their financial debt has just kept growing. Now they are needing to look at Bankruptcy as a result of substantial personal debts and mortgage.

They bought the house for $450,000, and they have $80,000 in various other debts.

They definitely wish to keep their home 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 believe that their house is at present only worth $450,000 after all these years. To make sure they searched sold section of the website to see what various other properties in the streets nearby have sold for most recently.

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.

Considering that there is no equity within this specific property the trustee will not ask Tanya and Matt to sell their house when they declare bankruptcy, as long as they maintain the mortgage payments then all will be well for them for the 3 years they are in personal bankruptcy.

At the end of the insolvency amount of time the trustee will write to them and inquire if they wish to take control of ownership of their home 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 home back. This is normally somewhere around $3,000 and $5,000 to pay for the legal expenses of changing the land title deed etc. This was a pretty simple sample to demonstrate how a house may be taken into consideration 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 Canberra 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.

As a result of a recent business complication Bill is about $240,000 in debt. Michelle who carries out work in banking has a separate job and no other personal debts besides the home loan. Bill can not pay out his financial 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 due to the home loan.

Here in this specific case 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 costs. These professionals might carry this out in a few ways; 1. Have them sell the house. 2. Welcome Michelle to buy Bills half of the equity. 3. leave them in the home – but it’s quite unlikely with this situation that the trustee will be happy to keep Bill and Michelle in the house considering that there is just a lot of equity.

So Michelle may have the ability to acquire 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 property.

Property and Bankruptcy in Australia is difficult to understand and complicated. These two examples above are simply the tip of the iceberg as far as your options in Canberra are concerned. If you need to know more about Bankruptcy and residential properties feel free to speak to us here at Bankruptcy Experts Canberra on 1300 795 575, or have a look at our website: