Bankruptcy Melbourne is a complex
process, but I know from meeting with thousands facing the prospect of
bankruptcy over the years, that nothing worries people more than the thought of
losing the family house. Almost everybody is psychologically connected to their
home - it's where the children have grown up, it's where you enjoy life on a
day to day basis.
Will you lose your home if you go bankrupt?
The solution is a resounding maybe. (not very helpful, I know) People typically
assume it's an inevitable consequence and a part of Bankruptcy, and therefore
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 agreed to pay back the debt you are in.
So how is it possible to keep my Melbourne
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 more clear 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 curious).
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 beyond your income threshold. The further
role is to sell off 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 house then it's pointless to sell
your home. This is happening much more since the GFC as house prices in many
regions have been heading south so what you paid 4 years ago may not
automatically reflect the price today.
A quick word of advice here if you have a
house in Melbourne and are looking at Bankruptcy: get an expert to help you
through this process, there are plenty of variables in these scenarios that
need to be considered.
You might wonder, why would the bank want
bankrupt clients? wouldn't they prefer to sell your house and not take the
risk? The bank that has nicely lent you the money for your house is earning
good money every month in interest out of you, month in month out, so long as
you keep up to date with your monthly payments then the bank desires you in
there at all costs. Essentially however it's not the bank's call if the trustee
establishes that there is ample 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 put down the value of your house and the level 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 get to this figure. When you
get a valuer out to your property, 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 provide 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 your home in the next 30 days you may control the result. The idea is that
you want a real sell now figure.
There are two reasons this valuation system
is critical to you: one you will likely have peace of mind ascertaining the
market value of your house, and then you can easily build your equity position.
The second thing is, your property may be really worth so much more than you
thought. Get some guidance before doing this. The number of times I've met with
clients that have sold their family home of 20 years simply to find out I could
of helped them keep it;
unfortunately this happens all too often
When it concerns Bankruptcy and houses,
another main consideration is ownership, often houses are bought 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 involves Bankruptcy, this is just
one of possibly numerous scenarios that are likely when it relates 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
single 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
contact Fresh Start Solutions Melbourne on 1300 818 575, or visit our website:
www.freshstartsolutions.com.au/bankruptcy-Melbourne
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