Bankruptcy Perth is a challenging
process, but I know from meeting with thousands facing the likelihood of
bankruptcy over the years, that practically nothing troubles people more than
the idea of losing the family home. Almost everyone is psychologically connected
to their home - it's where the kids have grown up, it's where you enjoy life on
a day to day base.
Will you lose your home if you go bankrupt?
The response is a resounding maybe. (not very helpful, I know) People typically
feel that 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 perk 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 Perth
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 more clear picture.
The role of the bankruptcy trustee is to
firstly abide by the regulation of the bankruptcy act 1966 (it's a very boring
read about 600 pages if you are interested).
Within that regulatory framework, the
trustee is to help recuperate monies owed to your creditors, that is executed
in a bunch of distinct ways but it mainly comes down to income and assets. The
trustees role is to collect payments over your income threshold. The other role
is to sell any assets that can contribute to repaying your debts.
What this seems 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 repay your debts. If
there is no equity in your home then it's pointless to sell your home. This is
happening increasingly since the GFC as house prices in many locations 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 Perth and are looking at Bankruptcy: get a professional to help you
through this process, there are loads of variables in these scenarios that have
to be considered.
You might wonder, why would the bank want
bankrupt clients? wouldn't they like to sell your house and not take the risk?
The bank that has generously lent you the money for your house is creating good
money every month in interest out of you, month in month out, provided you keep
up to date with your payments then the bank wants you in there at all costs.
Ultimately however it's not the bank's call if the trustee determines that
there is lots 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 write down the value of your house and the amount you owe on the house. A
tip if you are trying 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 advice 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 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 tell them you need to sell
your home in the next 30 days you may control the result. The idea is that you
want a sound sell now figure.
There are two reasons this valuation
process is critical to you: one you will have peace of mind ascertaining the
market value of your house, then afterwards you can easily build your equity
position. The second thing is, your home may be really worth much more than you
thought. Get some guidance before doing this. The number 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 primary consideration is ownership, often houses are bought 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 does not, the
equity is only factored on the 50 % of the property.
When it comes to Bankruptcy, this is just
one of probably 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 have to repeat this but get some guidance on
this area of Bankruptcy because it is very tricky and each and every case is
different.
If you want to learn more about what to do,
where to turn and what questions to ask about Bankruptcy, then feel free to
talk to Bankruptcy Advice Perth on 1300 879 867, or visit our website:
www.bankruptcy-advice.com.au/Perth.
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