Bankruptcy Sydney is a difficult to
understand process, but I know from meeting with thousands facing the chance of
bankruptcy over the years, that almost nothing worries people more than the
idea of losing the family home or apartment. Almost everyone is emotionally
connected to their home - it's where the children have grown up, it's where you
take pleasure in life on a day to day base.
Will you lose your house if you go
bankrupt? The solution is a resounding maybe. (not very useful, I know) People
typically think 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 strength 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 Sydney
house, you ask? It's easier if I explain the basic guideline behind the Bankruptcy
process as administered by the trustee, then you'll have a clearer picture.
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 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 other
role is to sell any assets that can contribute to fixing your debts.
What this seems like is that yes the
trustee will sell your house right? Not always. 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 increasingly more since the GFC as house prices in many
regions have been heading south so what you paid 4 years ago may not
necessarily reflect the price today.
A quick word of advice here if you have a
house in Sydney and are looking at Bankruptcy: get an expert to help you
through this process, there are loads of variables in these scenarios that need
to be considered.
You might wonder, why would the bank want
bankrupt clients? wouldn't they hope to sell your house and not take the risk?
The bank that has kindly lent you the money for your house is generating good
money every month in interest out of you, month in month out, provided that you
keep up to date with your fees then the bank really wants you in there at all
costs. Ultimately however it's not the bank's call if the trustee establishes
that there is plenty 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 note the value of your house and the level you owe on the house. A tip if
you are aiming 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 tips or a
real estate agents advice to reach this figure. When you get a valuer out to
your home, ensure that 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 offer two valuations: one
for a quick sale and one for a well marketed non time sensitive sale. Nowadays
that's not the case, but if you meet them and tell them 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 reasons this valuation
technique is critical to you: one you are going to have peace of mind
ascertaining the market value of your house, then afterwards you can easily
create your equity position. Secondly, your property may be worth so much more
than you thought. Get some advice before doing this. The amount of times I've
met clients that have sold their family home of 20 years simply to learn I
could of helped them keep it;
unfortunately this happens all too often
unfortunately this happens all too often
When it comes to Bankruptcy and houses,
another notable consideration is ownership, in most cases houses are purchased
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 comes down to Bankruptcy, this is
just one of potentially hundreds of scenarios that are likely when it relates
to the family home. Bear in mind the non-bankrupt party can buy the bankrupt's
part of the house in bankruptcy also. I need 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 really want 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 Sydney on 1300 818 575, or visit our website:
www.freshstartsolutions.com.au/bankruptcy-Sydney
