Bankruptcy Australia is a challenging
process, but I know from meeting with thousands facing the prospect of
bankruptcy over the years, that very little troubles people more than the
notion of losing the family house. Almost every person is on an emotional level
connected to their home - it's where the kids have grown, it's where you
appreciate life on a day to day basis.
Will you lose your home if you go bankrupt?
The response is a resounding maybe. (not very useful, I know) People typically
feel that it's an inevitable consequence and a part of Bankruptcy, and
consequently 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 accepted 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 guideline behind the Bankruptcy
process as administered by the trustee, then you'll have a more clear picture.
The function 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 eager).
Within that regulatory framework, the
trustee is to help recover monies owed to your creditors, that is carried out
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 paying back your debts.
What this resembles 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 in your home then it's pointless to sell your home. This is
happening increasingly since the GFC as house prices in many areas have been
heading south so what you paid 4 years ago may not necessarily reflect the
price today.
A quick word of advice here if you have a
house in Australia and are looking at Bankruptcy: get a skilled professional to
help you through this process, there are lots of variables in these scenarios
that should be considered.
You might wonder, why would the bank want
bankrupt clients? wouldn't they need to sell your house and not take the risk?
The bank that has nicely lent you the money for your house is making good money
every month in interest out of you, month in month out, provided that you keep
up to date with your repayments then the bank really wants you in there at all
costs. Ultimately however it's not the bank's call if the trustee establishes
that there is plenty 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 make a note of the value of your house and the quantity you owe on the
house. A tip if you are attempting to work out the value of your house: use a
registered valuer as this will provide you peace of mind, don't use your
neighbours' gut feel advice or a real estate agents advice to arrive at this
figure. When you get a valuer out to your home, make sure 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 give two valuations: one
for a quick sale and one for a well marketed non time delicate 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 main reasons this valuation
system is critical to you: one you may have peace of mind ascertaining the
market value of your house, and after that you can easily set up your equity
position. Secondly, your home may be really worth a lot more than you thought.
Get some tips before carrying this out. The number of times I've met with
clients that have sold their family home of 20 years simply to discover I could
of helped them keep it; unfortunately this happens all too often
When it concerns Bankruptcy and houses,
another serious 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 does not,
the equity is only factored on the 50 % of the property.
When it comes down to Bankruptcy, this is
just one of potentially 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
portion of the home in bankruptcy also. I should repeat this but get some
guidance on this area of Bankruptcy because it is very tricky and every case is
different.
If you need to learn more about what to do,
where to turn and what questions to ask about Bankruptcy, then feel free to
contact Bankruptcy Australia on 1300 795 575, or visit our website: www.bankruptcy-australia.net.au
