Bankruptcy Sydney is a complex process,
but I know from meeting with thousands facing the prospect of bankruptcy over
the years, that pretty much nothing concerns people more than the thought of
losing the family home or apartment. Almost everybody 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 base.
Will you lose your house if you go
bankrupt? The answer is a resounding maybe. (not very helpful, I know) People
generally believe 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 benefit 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 Sydney
house, you ask? It's easier if I explain the basic theory behind the Bankruptcy
process as administered by the trustee, then you'll have a clearer image.
The responsibility of the bankruptcy
trustee is to firstly follow the regulation of the bankruptcy act 1966 (it's a
very dull read about 600 pages if you are intrigued).
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 further
role is to sell any assets that can contribute to repaying your debts.
What this sounds like is that yes the
trustee will sell your house right? Not necessarily. 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 more and more since the GFC as house prices in many
locations 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
Sydney and are looking at Bankruptcy: get a qualified professional to help you
through this process, there are plenty of variables in these scenarios that
should be considered.
You might wonder, why would the bank want
bankrupt customers? wouldn't they need 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,
provided you keep up to date with your fees then the bank wants you in there at
all costs. Ultimately however it's not the bank's call if the trustee decides
that there is a lot 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 mark 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 give you peace of mind, don't use your neighbours' gut feel
recommendations or a real estate agents advice to arrive at this figure. When
you get a valuer out to your house, make certain you tell the valuer to value
the property for a quick sale, ensure 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. These days
that's not the case, but if you meet them and let them know you need to sell
the house in the next 30 days you may sway the result. The idea is that you want
a sensible sell now figure.
There are two main reasons this valuation
system is critical to you: one you will certainly have peace of mind
ascertaining the market value of your house, then afterwards you can easily
create your equity position. Second of all, your house may be worth even more
than you thought. Get some advice before carrying this out. The amount of times
I've met 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 comes to Bankruptcy and houses,
another significant 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 involves Bankruptcy, this is just
one of potentially hundreds of 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
information on this area of Bankruptcy because it is very tricky and each 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
reach out to Bankruptcy Advice Sydney on 1300 879 867, or visit our website:
www.bankruptcy-advice.com.au/Sydney.
