Bankruptcy And The Family Home

Can I Keep My House
With No Equity?

Bob and Sue live in New South Wales and own their family home. Times have actually not been great and they have chosen to apply for bankruptcy. They are extremely worried about what will happen to their home. In this particular case study, we will take a look at what really happens in New South Wales when you file for bankruptcy with a home with no equity in it.

Bob and Sue’s house is presently valued at $700,000 and the mortgage owing to the bank is also $700,000 meaning that they have no equity in their home. So, what will actually happen to Bob and Sue’s house now that they are going to declare bankruptcy?

House Has $30k or more in equity.

House Has $30k or More in Equity

Bob and Sue have made the really difficult decision to apply for bankruptcy, the biggest concern is their family house on which they have a mortgage for $670,000. Their house is valued at $700,000 so they have $30,000 equity in the property. So, in New South Wales, what will happen to their home when they file for bankruptcy? In this case study we can consider the equity as anything above $30,000 so this would be the same scenario as if their equity was $30,000, $100,000, $300,000 or $1,000,000 it doesn’t make any difference the principle is the same.
House Has $30k or more in equity.

House Is Owned By
One Partner
?

There is a general assumption in New South Wales that if a property is owned by one partner in a relationship that is not going bankrupt then the house is safe if the other partner goes bankrupt. This is not the case and you need to be really careful about this assumption.

In this case study Bob and Sue have been married for 15 years but their house is entirely in Sue’s name. Bob’s name is not on the title or on the mortgage but they have both lived in the property for the whole 15 years they have been together. Bob is needing to file for bankruptcy.

Surrendering the House to the Bank.

Bob and Sue have come to the hard decision to apply for bankruptcy and they are considering what to do with the house as they have no equity in it and they simply cannot afford the mortgage any longer. So, Bob and Sue choose to surrender their house to the bank. The very first thing we at Bankruptcy Experts Maitland would do for them is get them to sign a legal document which resembles a deed of release meaning they have voluntarily surrendered their house. This means the bank does not have to pursue legal action to have them removed from the house.
surrendering the house to bank

Selling the House to a Family Member Prior to Bankruptcy, Is It Legal?

Bob and Sue are coming to the realisation that sometime in the future they will probably need to file for bankruptcy but they own their family home. Bob and Sue are thinking about possibly selling the house prior to going bankrupt so that they don’t lose the money from the sale of the property when they declare bankruptcy. The question we often get asked here at Bankruptcy Experts Maitland is whether that is legal to do or are you doing something wrong.
A Question of Caveats

A Question of Caveats

Bob and Sue have owned a property for many years, have worked really hard and have $200,000 equity in their house. Their home is valued at $700,000 and they presently have about $500,000 on their mortgage.

Bob is a builder in NSW and has really been struggling due to the fact that he hurt his back. He owes $150,000 in overdue accounts to a particular hardware store who have actually been very patient with Bob and are aware of his situation.

A Question of Caveats

Names on House Titles

In New South Wales the name or names on the title of a property are very important in bankruptcy, however, it is not the be all and end all. For example, some of our clients call and ask if they can change who is on the title of their property to try to protect that property before they go bankrupt. In this case of Bob and Sue, Sue owns the house and needs to declare bankruptcy and she has some equity in the house. They do not wish to lose the house so to protect it Bob and Sue decide that Sue should transfer the title to Bob’s name and take her name off of the property.

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Big 5 Questions

– Is Going Bankrupt Right for me?
– Will I lose my job?
– How will my income be affected?
– Can I keep my house or car?
– Will I lose my business or can I still be self-employed?

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When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.

Bob is seriously thinking about bankruptcy and feels like he has no choice. He has grave concerns because his wife Sue owns the Maitland home that they live in and he is very worried about what will happen to that property should he declare Bankruptcy. In this case study we explore what happens to the property when the house is purely in Sue’s name and Bob’s name is neither on the title nor on the mortgage.
When The House is in Your Partners Name, and They Don’t Need to go Bankrupt.

When the House Is In Your Name, You Need To Go Bankrupt And Your Partner Has Contributed To The House.

In the following case studies we look into the implications when one partner who owns the property declares bankruptcy. Does the other partner who is not on the title have any claim to keep some of the equity in the property?

Bob owns a Maitland home worth $700,000 he owes the bank $600,000 and as a result has $100,000 equity in the property. Bob now needs to go bankrupt and he’s really worried about losing his house when he applies for bankruptcy, especially considering his partner Sue has actually been contributing financially towards mortgage payments for the last five years.

Why would you go bankrupt if you had equity in your house?

Why Would You Go Bankrupt If You Had Equity In Your House?

Bob and Sue have owned their Maitland house for years and have actually worked really hard to build up some equity in the property. Their home is currently valued at $700,000 and they owe the bank $600,000 giving them $100,000 equity. In this case study Bob and Sue have a combined debt of $180,000, far greater than the $100,000 equity they have in their house.
Why would you go bankrupt if you had equity in your house?

Can I Sell My House To A Family Member Before I Go Bankrupt ?

This is a question that, on the surface of it, sounds awfully risky, however it is not if you understand what you are doing and things are done in an appropriate commercial way.

Let us say Bob and Sue own a property worth $700,000 and they owe $650,000 on the mortgage. They desperately wish to hang on to the Maitland property as it has some nostalgic value and some practical implications as Sue’s grandmother resides in a granny flat out the back and their disabled child needs the wheelchair access set up at the property.

But I Have Mortgage Insurance?

Five years earlier when Bob and Sue were looking to purchase a home in New South Wales all they could manage to pull together was a deposit of 5%. When they purchased their house they went to the bank and the bank was fine with the 5% deposit but they had to also pay for mortgage insurance. Bob and Sue were happy to pay the mortgage insurance since they didn’t have the required 20% deposit to eliminate paying mortgage insurance premiums and it meant that they could purchase a house sooner.

What If My Partner Wants To Buy My Share of the Property When I go Bankrupt?

Bob needs to declare bankruptcy however his partner Sue does not. They own a Maitland home together worth $700,000 and they have $100,000 equity in the house. Bob has realised that he can no longer afford to contribute to paying the mortgage on the property and is needing to go bankrupt. Sue on the other hand does not want to lose the family home that they have worked so hard to keep.

Bob and Sue need to know if there is any way when Bob declares bankruptcy that Sue can potentially buy out Bob’s interest in the property and retain their home.

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?

Let us examine under what circumstance your house could be tied up for more than the three year minimum bankruptcy period. Let us say that when Bob and Sue declared bankruptcy they decided that they wished to try and keep their Maitland home after bankruptcy. At the time they declared bankruptcy the house was worth $700,000 and they still owed the bank the full $700,000.

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

What If I Can Not Keep Paying the Mortgage Halfway Through My Bankruptcy ?

Bob and Sue went bankrupt eighteen months ago without any equity in their family home. They had decided they would try to keep the property so that at the end of the three years they had somewhere to live. However, after a year Bob lost his job due to illness and Sue then got retrenched from her work. This meant that they no longer had any capacity to continue to pay the mortgage. In this case it is fairly straightforward, Bob and Sue contact the trustee and the bank and let them know that they can no longer afford to make the payments on the mortgage and that they will be moving out.

What If I Decide to Hand the House Back to the Bank When I Go Bankrupt, How Long Do I Have Before I Am Required to Leave?

Bob and Sue have struck a couple of financial hurdles and have made a decision to declare bankruptcy. They cannot afford to keep up the mortgage payments and so have decided to walk away from their family house. The question is, when bankrupt how long have Bob and Sue got before they will be required to vacate the property?
Bankruptcy Experts - Case Study -  What if i decide to hand the house back to the bank when i go bankrupt, how long do i have before i need to leave?

Surely I Can Keep
The Family Home
If I Go Bankrupt?

Bob and Sue have finally faced the reality of declaring bankruptcy and they, like a lot of people facing bankruptcy, are thinking surely we will not lose our family house, we need to live somewhere.

Sadly in many bankruptcy situations, as we have seen in these case studies, keeping your house is not an easy process. Many times it is simply not possible. Keeping your home in bankruptcy is all about the money, it is not about the sentimental value, emotional value or your own particular circumstances it is an extremely cut and dry procedure.

What If My House Was Purchased With an Inheritance?

Bob and Sue have been living in their Maitland family house for five years and about two years ago Sue inherited a large amount of money from her Aunty June. Bob and Sue made a decision to put the inheritance money into their mortgage to help them pay off their home.

The question is, if Sue puts her inheritance money toward their property, is that money safe if Bob and Sue decide they have to file for bankruptcy? In NSW the answer to that question is no, it is not safe at all.

What if i purchase my house

I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?

Bob and Sue have been residing in their family home for several years. About five years ago Bob had a major accident at work, he got a large compensation payout from his employer which he put into the house mortgage. The question is, if Bob makes a decision to file for bankruptcy is that compensation money safe or will he lose it?
I bought a house with Compensation Money is it safe If I go bankrupt?

Will I Still Have to Pay Rates, Insurance and Body Corp If I Go Bankrupt?

Bob and Sue are filing for bankruptcy and have come to the heart-breaking decision to leave their Maitland property as they have no equity in it. They are going to hand it back to the bank but the question is will they still be liable to pay the rates and insurance after they hand the house back.

On the day they declare bankruptcy Bob and Sue will no longer continue to be the owners of their home. The bankruptcy trustee will usually remove Bob and Sue’s names from the title and put the trustee’s name in their place, then the house is just handed back to the bank. Even if Bob and Sue had outstanding rates of $8,000 owing at the time of bankruptcy they will now not have to pay them and any unpaid household debts will not affect them handing the house back to the bank.