|March 7, 2017||3|
Bankruptcy in Australia is a difficult procedure, but I recognize from meeting with thousands encountering the likelihood of going bankrupt for many years that the most frightening aspect is the concern of losing the family residence.
Practically everyone is on an emotional level attached to their house – it’s where the kids have grown, it’s where you sleep, eat, unwind and built it from a house to a home. So it is distressing to believe that a thing like insolvency can move in and take all of that from you.
So, Will you lose your home if you declare bankruptcy?
My response is ‘possibly’ – I realise it is not an useful answer, but it will really based on your unique instances. People normally think that losing your house is inevitable and just one more part of Bankruptcy – but don’t make yourself mad just yet, because there might be hope.
So how does personal bankruptcy view my house?
The very first thing to understand is that homes are viewed as assets – but no two houses will be the same. What you should grasp is that when it comes to Bankruptcy, they designate a trustee to oversee the process. Their role is to make certain that they can repay as much of your liabilities with your asset. This is done through equity – and if there is no equity in your house then there is no true benefit to selling it.
Trustees not selling residential properties is happening progressively more since the GFC as house prices in many places have been going south so what you spent 4 years ago may not automatically demonstrate the price today.
But the biggest part with Australia and Bankruptcy is that you truly need to get a specialist to help you with this procedure, there are plenty of factors in these situations that ought to be taken into consideration.
For example, if you have no equity in your house you will need to think about your bank loan. With loans, you are essentially just a client of the bank and they will similarly have a choice– will they want to get your home back, or do they prefer you to keep the home loan? You may expect that they would certainly want to just take the house to avoid the risk, but honestly financial institutions are run as a business, and if these guys can leave you with a loan to keep generating income off you, they generally will provided that you keep up to date with your repayments. But it is still up to the trustee to establish that there is a lot of equity in your house the trustee will push you and the bank to sell off your home.
What is my home worth?
Usually with Bankruptcy it is difficult to know what your home is actually worth– indeed, you may have an idea if you were selling off your home, but the way that this is calculated in insolvency is typically different. When you file for insolvency you may need to note down the value of your home, and the amount that you owe– and you can figure this out by utilizing a valuer. Doing this is going to be far more precise than using your ‘gut feel’ or a real estate agent. The other important factor is that you need to ask your valuer for two valuations– one for a Quick Sale, and one for a non-time sensitive sale. This will certainly give you 2 rational amounts that can help you to correctly value the residential property and understand its worth even when you are being pushed to sell swiftly.
When it comes to Bankruptcy and homes, another significant point to consider is ownership, in most cases houses are bought in joint titles. In other words a couple may have bought a house 50/50 making use of both of these salaries to make the repayments. If one party declares insolvency and the other party does not, the equity is solely factored on the 50 % of the property. With Bankruptcy, this is merely one of probably numerous situations that are probable when it relates to the family home. Bear in mind the non-bankrupt party can purchase the bankrupt’s part of the house in insolvency too. I should repeat this but get some guidance on this area of Bankruptcy given that it is very complicated and every case is different.
If you genuinely wish to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to reach out to Bankruptcy Experts on 1300 818 575, or visit our website: www.freshstartsolutions.com.au.