Bankruptcy Australia is a difficult to
understand process, but I know from meeting with thousands facing the
likelihood of bankruptcy over the years, that not much concerns people more
than the notion of losing the family home or apartment. Almost everyone is emotionally
connected to their home - it's where the kids have grown, it's where you take
pleasure in life on a day to day basis.
Will you lose your house if you go
bankrupt? The reply is a resounding maybe. (not very useful, I know) People
typically imagine it's an inevitable consequence and a part of Bankruptcy, and
hence push themselves to the brink of insanity to not lose the family home. But
when it comes to the whole process of Bankruptcy, a key perk of Debt Agreements
and Personal Insolvency Agreements is you can keep your house. The reason is
simple: you've agreed to pay back the debt you are in.
So how is it possible to keep my Australia
house, you ask? It's easier if I explain the basic idea behind the Bankruptcy
process as administered by the trustee, then you'll have a clearer idea.
The role of the bankruptcy trustee is to
firstly abide by the regulation of the bankruptcy act 1966 (it's a very dry
read about 600 pages if you are curious).
Within that regulatory framework, the
trustee is to help recover monies owed to your creditors, that is accomplished
in a bunch of different ways but it mainly comes down to income and assets. The
trustees role is to collect payments beyond your income threshold. The other
role is to sell off any assets that can contribute to repaying your debts.
What this resembles is that yes the trustee
will sell your house right? Not normally. The only reason the trustee will sell
any asset including your house is to get money to repay your debts. If there is
no equity on your property then it's pointless to sell your home. This is
happening increasingly more since the GFC as house prices in many areas have
been heading south so what you paid 4 years ago may not always reflect the
price today.
A quick tip here if you have a house in
Australia and are looking at Bankruptcy: get an expert to help you through this
process, there are plenty of variables in these scenarios that need to be
considered.
You might wonder, why would the bank want
bankrupt customers? wouldn't they hope to sell your house and not take the
risk? The bank that has generously lent you the money for your house is
generating good money every month in interest out of you, month in month out,
as long as you keep up to date with your payments then the bank really wants you
in there at all costs. Essentially however it's not the bank's call if the
trustee determines that there is ample equity in your house the trustee will
force you and the bank to sell the house.
When you file for bankruptcy you are asked
to mark the value of your house and the portion you owe on the house. A tip if
you are trying to work out the value of your house: use a registered valuer as
this will give you peace of mind, don't use your neighbours' gut feel
suggestions or a real estate agents advice to come to this figure. When you get
a valuer out to your property, make certain you tell the valuer to value the
property for a quick sale, make sure you mow the lawn and don't leave the
kitchen in a mess also.
Valuers used to offer two valuations: one
for a quick sale and one for a well marketed non time sensitive sale. Nowadays
that's not the case, but if you meet them and let them know you need to sell
your home in the next 30 days you may control the result. The idea is that you
want a life-like sell now figure.
There are two reasons this valuation
technique is critical to you: one you will have peace of mind ascertaining the
market value of your house, and after that you can easily build your equity
position. Secondly, your house may be really worth so much more than you
thought. Get some guidance before carrying this out. The amount of times I've
met with clients that have sold their family home of 20 years only to learn I
could of helped them keep it; unfortunately this happens all too often
When it comes to Bankruptcy and houses,
another main consideration is ownership, often houses are purchased in joint
names. In other words a couple may be a house 50/50 using both incomes to make
the payments. If one party declares bankruptcy and the other party doesn't, the
equity is only factored on the 50 % of the property.
When it relates to Bankruptcy, this is just
one of likely numerous scenarios that are possible when it comes down to the
family home. Bear in mind the non-bankrupt party can buy the bankrupt's part of
the house in bankruptcy also. I should repeat this but get some information on
this area of Bankruptcy because it is very tricky and each and every case is
different.
If you really want to learn more about what
to do, where to turn and what questions to ask about Bankruptcy, then feel free
to speak to Bankruptcy Experts Australia on 1300 795 575, or visit our website:
www.bankruptcyexpertsAustralia.com.au.
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