House Has $30k or More in Equity
Bob and Sue have made the really difficult decision to declare bankruptcy, the biggest concern is their family house on which they have a mortgage for $670,000. Their house is valued at $700,000 so they have $30,000 equity in the property. So, in Australia, what will happen to their house when they declare bankruptcy? In this case study we can consider the equity as anything above $30,000 so this would be the same scenario as if their equity was $30,000, $100,000, $300,000 or $1,000,000 it does not make any difference the principle is the same.
Surrendering the House to the Bank.
Bob and Sue have come to the hard decision to file for bankruptcy and they are considering what to do with the house as they have no equity in it and they simply cannot afford the mortgage any longer.
So, Bob and Sue decide to surrender their home to the bank. The very first thing we at Bankruptcy Australia would do for them is get them to sign a legal document which resembles a deed of release meaning they have voluntarily surrendered their home. This means the bank does not need to pursue legal action to have them removed from the house.
A Question of Caveats
Bob and Sue have owned a property for many years, have worked really hard and have $200,000 equity in their house. Their house is valued at $700,000 and they presently have about $500,000 on their mortgage.
Bob is a builder and has really been having a hard time since he injured his back. He owes $150,000 in unpaid accounts to a particular hardware store who have actually been very patient with Bob and understand his situation.
When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.
Why Would You Go Bankrupt If You Had Equity In Your House?
But I Have Mortgage Insurance?
Five years ago when Bob and Sue were aiming to buy a home all they could manage to pull together was a deposit of 5%. When they bought their home they went to the bank and the bank was fine with the 5% deposit but they had to also pay for mortgage insurance coverage. Bob and Sue were happy to pay the mortgage insurance due to the fact they didn’t have the required 20% deposit to eliminate paying mortgage insurance premiums and it meant that they could buy a house sooner.
I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?
Let us examine under what circumstance your home could be tied up for more than the three year minimum bankruptcy period. Let us say that when Bob and Sue declared bankruptcy they decided that they wished to try and keep their house after bankruptcy. At the time they declared bankruptcy the house was worth $700,000 and they still owed the bank the entire $700,000.
What If I Decide to Hand the House Back to the Bank When I Go Bankrupt, How Long Do I Have Before I Am Required to Leave?
I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?
Bob and Sue have been residing in their family home for many years. About five years ago Bob had a serious accident at work, he got a big compensation payout from his employer which he put into the house mortgage. The question is, if Bob makes a decision to file for bankruptcy is that compensation money safe or will he lose it?