Can I Keep My House
With No Equity?
Bob and Sue live in Australia and own their family home. Times have actually not been great and they have decided to apply for bankruptcy. They are terribly stressed over what will happen to their home. In this particular case study, we will take a look at what actually happens in Australia when you file for bankruptcy with a home with no equity in it.
Bob and Sue’s home is currently valued at $700,000 and the mortgage owing to the bank is also $700,000 meaning that they have no equity in their home. So, what will actually happen to Bob and Sue’s house now that they are going to go bankrupt?
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.
House Is Owned By
There is a general assumption in Australia that if a property is owned by one partner in a relationship that is not declaring bankruptcy then the house is safe if the other partner goes bankrupt. This is not the case and you need to be extremely careful about this assumption.
In this case study Bob and Sue have been married for 15 years but their house is solely in Sue’s name. Bob’s name is not on the title or on the mortgage but they have both lived in the property for the entire 15 years they have been together. Bob is needing to declare bankruptcy.
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 Experts 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.
Selling the House to a Family Member Prior to Bankruptcy, Is It Legal?
Bob and Sue are coming to the realisation that sometime in the future they will probably need to declare bankruptcy but they own their family home. Bob and Sue are considering possibly selling the house prior to declaring bankruptcy so that they do not lose the money from the sale of the property when they go bankrupt. The question we frequently get asked here at Bankruptcy Experts Australia is whether that is legal to do or are you doing something wrong.
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.
Names on House Titles
In Australia the name or names on the title of a property are very important in bankruptcy, however, it is not the be all and end all. For example, some of our customers call and ask if they can change who is on the title of their property to try to protect that property before they go bankrupt. In this case of Bob and Sue, Sue owns the house and needs to declare bankruptcy and she has some equity in the house. They do not wish to lose the house so to safeguard it Bob and Sue decide that Sue should transfer the title to Bob’s name and take her name off of the property.
Big 5 Questions
– Is Going Bankrupt Right for me?
– Will I lose my job?
– How will my income be affected?
– Can I keep my house or car?
– Will I lose my business or can I still be self-employed?
If you are considering bankruptcy, being able to answer these questions is vital. Then you’ll know exactly what will happen to your business and assets should you choose to file for bankruptcy. Feel free to download our eBook for free and inform yourself today. Or, if your questions are more complex, call us directly on 1300 795 575.
When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.
When the House Is In Your Name, You Need To Go Bankrupt And Your Partner Has Contributed To The House.
Bob owns a house worth $700,000 he owes the bank $600,000 and as a result has $100,000 equity in the property. Bob now needs to go bankrupt and he’s really worried about losing his home when he files for bankruptcy, especially considering his partner Sue has actually been contributing financially towards mortgage payments for the last 5 years.
Why Would You Go Bankrupt If You Had Equity In Your House?
Can I Sell My House To A Family Member Before I Go Bankrupt ?
This is a question that, on the surface of it, sounds awfully risky, however it is not if you understand what you are doing and things are done in an appropriate commercial manner.
Let us say Bob and Sue own a property worth $700,000 and they owe $650,000 on the mortgage. They desperately wish to hang on to the property as it has some nostalgic value and some practical implications as Sue’s grandmother resides in a granny flat out the back and their disabled daughter needs the wheelchair access set up at the property.
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.
What If My Partner Wants To Buy My Share of the Property When I go Bankrupt?
Bob needs to declare bankruptcy however his partner Sue does not. They own a house together worth $700,000 and they have $100,000 equity in the house. Bob has actually realised that he can no longer afford to contribute to paying the mortgage on the property and is needing to declare bankruptcy. Sue on the other hand does not wish to lose the family house that they have worked so hard to keep.
Bob and Sue need to find out if there is any way when Bob goes bankrupt that Sue can potentially buy out Bob’s interest in the property and retain their home.
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 Can Not Keep Paying the Mortgage Halfway Through My Bankruptcy ?
Bob and Sue declared bankruptcy eighteen months ago with no equity in their family home. They had decided they would attempt to keep the property so that at the end of the three years they had somewhere to live. However, after a year Bob lost his job due to illness and Sue then got retrenched from her work. This meant that they no longer had any capability to continue to pay the mortgage. In this case it is fairly straightforward, Bob and Sue contact the trustee and the bank and let them know that they can no longer afford to make the payments on the mortgage and that they will be moving out.
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?
Surely I Can Keep
The Family Home If I Go Bankrupt?
Bob and Sue have finally faced the reality of going bankrupt and they, like a lot of people confronting bankruptcy, are thinking surely we won’t lose our family home, we need to live somewhere.
Unfortunately in lots of bankruptcy situations, as we have seen in these case studies, keeping your home is not an easy process. Sometimes it is simply not possible. Keeping your home in bankruptcy is all about the money, it is not about the sentimental value, emotional value or your own particular circumstances it is an extremely cut and dry procedure.
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?
Will I Still Have to Pay Rates, Insurance and Body Corp If I Go Bankrupt?
Bob and Sue are applying for bankruptcy and have come to the heart-breaking decision to leave their property as they have no equity in it. They are going to hand it back to the bank but the question is will they still be liable to pay the rates and insurance after they hand the house back.
On the day they file for bankruptcy Bob and Sue will no longer continue to be the owners of their house.