Bankruptcy Australia is a confusing
process, but I know from meeting with thousands facing the likelihood of
bankruptcy over the years, that nothing troubles people more than the thought
of losing the family house. Almost everybody is emotionally connected to their
home - it's where the children have grown, it's where you appreciate life on a
day to day basis.
Will you lose your home if you go bankrupt?
The reply is a resounding maybe. (not very useful, I know) People generally
think it's an inevitable consequence and a part of Bankruptcy, and because of
this 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 strength 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 principle behind the Bankruptcy
process as administered by the trustee, then you'll have a more clear picture.
The purpose of the bankruptcy trustee is to
firstly abide by the regulation of the bankruptcy act 1966 (it's a very boring
read about 600 pages if you are wondering).
Within that regulatory framework, the
trustee is to help recover monies owed to your creditors, that is executed in a
bunch of distinct ways but it mainly comes down to income and assets. The
trustees role is to collect payments beyond your income threshold. The further
role is to sell off any assets that can contribute to repaying your debts.
What this seems like is that yes the
trustee will sell your house right? Not normally. The only reason the trustee
will sell off 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 much more since the GFC as house prices in many regions
have been heading south so what you paid 4 years ago may not really reflect the
price today.
A quick tip here if you have a house in
Australia and are looking at Bankruptcy: get a specialist to help you through
this process, there are loads of variables in these scenarios that have to be
considered.
You might wonder, why would the bank want
bankrupt clients? wouldn't they choose to sell your house and not take the
risk? The bank that has nicely lent you the money for your house is creating
good money every month in interest out of you, month in month out, provided you
keep up to date with your payments then the bank wants you in there at all
costs. Essentially however it's not the bank's call if the trustee decides that
there is lots of 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 put down the value of your house and the level you owe on the house. A tip
if you are aiming 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 arrive at this figure. When you
get a valuer out to your house, ensure you tell the valuer to value the
property for a quick sale, make certain you mow the lawn and don't leave the
kitchen in a mess also.
Valuers used to give 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 tell them you need to sell the
house in the next 30 days you may sway the result. The idea is that you want a
realistic sell now figure.
There are two main reasons this valuation
system is critical to you: one you are going to have peace of mind ascertaining
the market value of your house, and afterwards you can easily set up your
equity position. The second thing is, your home may be worth a lot more than
you thought. Get some suggestions before doing this. The amount of times I've
met clients that have sold their family home of 20 years only to figure out I
could of helped them keep it; unfortunately this happens all too often
When it comes to Bankruptcy and houses,
another big consideration is ownership, often houses are purchased in joint
names. Simply put 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 concerns Bankruptcy, this is just
one of probably numerous scenarios that are likely when it comes down to the
family home. Bear in mind the non-bankrupt party can buy the bankrupt's part of
the property in bankruptcy also. I have to repeat this but get some assistance
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 Liquidation Service on 1300 795 575, or visit our website: www.liquidationservice.com.au
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