Bankruptcy Sydney is a confusing
process, but I know from meeting with thousands facing the chance of bankruptcy
over the years, that practically nothing troubles people more than the thought
of losing the family home or apartment. Almost every person is emotionally
connected to their home - it's where the kids have grown up, it's where you
enjoy life on a day to day basis.
Will you lose your house if you go
bankrupt? The response is a resounding maybe. (not very useful, I know) People
generally imagine 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 advantage 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 principle behind the Bankruptcy
process as administered by the trustee, then you'll have a clearer idea.
The purpose of the bankruptcy trustee is to
firstly follow the regulation of the bankruptcy act 1966 (it's a very plain
read about 600 pages if you are wondering).
Within that regulatory framework, the
trustee is to help recuperate monies owed to your creditors, that is executed
in a bunch of diverse ways but it mainly comes down to income and assets. The
trustees role is to collect payments over and above your income threshold. The
further role is to sell off any assets that can contribute to fixing 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 pay back your debts. If
there is no equity on your property then it's pointless to sell your home. This
is happening more and 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 word of advice here if you have a
house in Sydney 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 customers? wouldn't they want to sell your house and not take the
risk? The bank that has generously lent you the money for your house is making
good money every month in interest out of you, month in month out, as long as
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 loads 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 document the value of your house and the amount of money 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 offer you peace of mind, don't use your
neighbours' gut feel suggestions or a real estate agents advice to come to this
figure. When you get a valuer out to your home, 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. 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 control the result. The idea is that
you want a reasonable 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, and after that you can easily
build your equity position. Second of all, your home may be worth far 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 learn I could
of helped them keep it; unfortunately this happens all too often
When it concerns Bankruptcy and houses,
another significant consideration is ownership, often houses are purchased in
joint names. To puts it simply 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 to Bankruptcy, this is just
one of potentially hundreds of scenarios that are possible when it comes to the
family home. Bear in mind the non-bankrupt party can buy the bankrupt's portion
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 every case
is different.
If you wish to learn more about what to do,
where to turn and what questions to ask about Bankruptcy, then feel free to
call Bankruptcy Experts Sydney on 1300 795 575, or visit our website:
www.bankruptcyexpertsSydney.com.au.
