Bankruptcy And The Family Home

Bob and Sue are filing for bankruptcy and have come to the heart-breaking decision to leave their Northern Rivers 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 file for bankruptcy Bob and Sue will no longer continue to be the owners of their home. The bankruptcy trustee will generally 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 overdue household debts will not impact them handing the house back to the bank.

Should Bob and Sue decide to keep the property after going bankrupt that is a completely different matter. If they remain on in their home they will still be responsible for anybody corporate fees, rates, insurances, and any other costs associated with home ownership.

If you are not too sure exactly where you stand with your rates or other household bills when declaring bankruptcy, feel free to call us here at Bankruptcy Northern Rivers on 1300 795 575 for well-informed and relevant advice.

Bob and Sue have been living in their family home for many years. About five years ago Bob had a serious 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 declare bankruptcy is that compensation money safe or will he lose it?

Before we explore this any further, when it comes to bankruptcy any compensation payments in either a lump sum or as weekly payments are very complicated. Our advice in this situation is to make sure you get some proper advice before you file for bankruptcy. Do not just take what we say here as gospel because there are a lot of variables in this very tricky situation.

After his accident at work Bob got $200,000 in compensation, he put the full $200,000 towards his home which is worth $700,000, he and Sue now only owe the bank $500,000 Bob and Sue have decided to apply for bankruptcy and there is essentially $200,000 equity in the property.

In New South Wales compensation money acquired as a result of an accident is generally considered safe and protected when you apply for bankruptcy. In this situation Bob’s compensation money that he put towards the house is safe despite the fact that he has gone bankrupt. Bob and Sue can continue to keep the $200,000 which has become equity in their house, whether they choose to sell the house or stay residing in it. The money Bob has as a result of his compensation payments is safe. This does not always apply with compensation money, sometimes if you get compensation due, for example, to a health problem it can be quite complicated.

If you are looking at declaring bankruptcy in NSW, before you do anything give us a call here at Bankruptcy Northern Rivers on 1300 795 575 for expert help and guidance.

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

The question is, if Sue puts her inheritance money toward their property, is that money safe if Bob and Sue decide they need to apply for bankruptcy? In NSW the answer to that question is no, it is not safe at all. Inheritances and inheritance money received prior to bankruptcy are still looked at as assets and as such are still exposed to the bankruptcy trustee. The trustee has the right to take any asset of yours as a part of your bankruptcy estate, so do not presume that any inheritance or inheritance funds are safe when you file for bankruptcy, they are not.

To learn more about inheritance moneys and how they, and other assets, are affected by bankruptcy, call Bankruptcy Northern Rivers on 1300 795 575.

Bob and Sue have made a decision to file for bankruptcy and have decided that because they own their family house they do not want to lose it. Nevertheless, Bob and Sue can no longer afford to make the payments and pay the other costs associated with home ownership. Instead of simply selling their home out on the open market Bob’s uncle has decided he wants to purchase the property. The question is, in New South Wales can Bob and Sue legally sell their property to a relative before they go bankrupt? The answer is yes, in some cases. Where people go very wrong in this situation is selling their home to a family member, or someone they know, at a heavily reduced rate. This triggers all sorts of problems not only for the people filing for bankruptcy but also for the person who buys the property.

Let us say that Bob and Sue’s house is worth $700,000 and they owe the bank $600,000. They decide to sell the property to Bob’s uncle Joe for $600,000, believing that will clear their mortgage debt and Uncle Joe gets a bargain. The problem here is the bankruptcy trustee will ask what the market value of the property was when they sold it. Bob and Sue will tell them it was worth $700,000 and the trustee will tell them that they should have sold it to Uncle Joe for the full $700,000. In this situation the bankruptcy trustee will instruct Uncle Joe to pay the bankruptcy estate the $100,000 discount that he thought he had saved buying Bob and Sue’s property. To protect themselves from the possibility of selling their house too cheaply before they went bankrupt, Bob and Sue really should have had an independent valuation done on the property before it was sold. They should also have ensured that the transaction was done properly using a solicitor or conveyancer to help them with the sale. If you are looking at selling your home to a family member prior to bankruptcy don’t try anything tricky, keep it a strictly commercial transaction the same as if you were selling to a stranger.

These are just the basics of selling a home to a family member prior to declaring bankruptcy. This process is usually a lot more complicated, so if you would like to learn more feel free to call us here at Bankruptcy Northern Rivers on 1300 795 575.

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

Sadly in lots of bankruptcy situations, as we have seen in these case studies, keeping your house is not an easy process. Many times it is just not possible. Keeping your house in bankruptcy is all about the money, it is not about the sentimental value, emotional value or your own particular circumstances it is a very cut and dry procedure. When you are bankrupt if there is equity in your property the equity needs to be realised so creditors get paid some or all of what you owe them. That is how bankruptcy operates in NSW, no matter what your circumstances, if you have a house that you have equity in then it is under threat when you declare bankruptcy.

If you need some advice about your family home or anything to do with bankruptcy do not hesitate to call us here at Bankruptcy Northern Rivers on 1300 795 575. We will walk you through all your bankruptcy options and what you can do with your house.

Bob and Sue have struck a couple of financial hurdles and have decided to go bankrupt. They cannot afford to keep up the mortgage payments and so have chosen to walk away from their family house. The question is, once bankrupt how long have Bob and Sue got before they will be required to leave the property?

The good news is, it is not as quick as you may assume. Every circumstance is different depending upon the banks, the bankruptcy trustee and the individuals but basically Bob and Sue do not need to panic, they will not have to be out the next week or anything crazy like that. Leaving your house is normally quite a sensible process and sometimes the bank may even ask you to remain in the property to help them sell it.

In this type of situation, if Bob and Sue are up to date on their mortgage they will usually have about two or three months to vacate. If Bob and Sue were really way behind on their mortgage repayments then the bank will most likely want them out sooner rather than later. In either case, once they declare bankruptcy Bob and Sue will have time to find and move into a new place to live.

If you are concerned that you are going to lose your home because of bankruptcy call us at Bankruptcy Northern Rivers on 1300 795 575 and we can guide you through your options.

Bob and Sue declared bankruptcy eighteen months ago without any equity in their family house. They had made a decision 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 capability 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.

It really is that easy, remember in bankruptcy Bob and Sue are both already bankrupt so simply handing the house back even if the bank makes a loss when they sell is not Bob or Sue’s problem. This is the one get out of jail free card you get in life if you can’t afford to pay your mortgage.

There is a lot more involved in this situation of course so if would like more information on what you may need to do in this bankruptcy situation, give Bankruptcy Northern Rivers a call on 1300 795 575.

Let us examine under what circumstance your house could be tied up for more than the 3 year minimum bankruptcy period. Let us say that when Bob and Sue declared bankruptcy they decided that they wished to try and keep their Northern Rivers 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. As there was no equity in the house at this time the trustee decided not to take any further action regarding the property. Bob and Sue could remain living in the property as long as they keep making the mortgage payments. Their life will go on with the house to be re-evaluated at the end of the 3 year bankruptcy period.

If you retain a property, it is standard to have it revalued when you reach completion of your bankruptcy. In Bob and Sue’s case their house was revalued and it had increased in value from $700,000 to $780,000. In order to have the property released back to them they would be required to pay the trustee $80,000 which is the equity that the house has actually increased by over the three years of bankruptcy. The trustee will now continue to keep ownership of the property till Bob and Sue have done one of two things. One, they can choose to sell the property as it is now worth more than when they originally went bankrupt. Two, Bob and Sue have the option to find $80,000, pay it to the trustee and once it is paid have the house back. However, finding $80,000 is difficult, especially when you have been bankrupt, it might take Bob and Sue two or three years to come up with $80,000. In this situation the trustee would continue to keep the house in the trustee’s name past the three year period of bankruptcy, this allows Bob and Sue to pay off the $80,000 gain in equity and so keep their home.

In NSW there are a number of other reasons why a trustee might continue to keep the house locked into the bankruptcy process beyond the three years but essentially it all comes down to money like the majority of things in bankruptcy you just need to follow the money.

Believe it or not it is quite easy to have your house tied up in the bankruptcy process for a number of years well after your release from bankruptcy. If you have a home in New South Wales and want guidance on how you might be able to keep your property in bankruptcy, call us at Bankruptcy Northern Rivers on 1300 795 575. We can help you work through what your options are and how you can best avoid any complications.

Bob needs to declare bankruptcy however his partner Sue does not. They own a home together worth $700,000 and they have $100,000 equity in the home. Bob has actually 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 goes bankrupt that Sue can potentially buy out Bob’s interest in the property and retain their home. The answer is yes, possibly. When Bob declares bankruptcy Sue can approach the bankruptcy trustee and offer to make a payment of $50,000 for Bob’s half of the equity in the property. The $50,000 might potentially be a little less or a little more depending upon the trustee and what the market value of the house is. But approximately $50,000 is what Sue will need to pay to settle the house and keep it in her name.

However, a couple of things will need to be considered before this is possible. First of all Sue will need to satisfy the bank that without Bob she can manage to make payments on the property by herself. It is not just merely a matter of Sue taking over the payments though, in many cases the bank will require Sue to completely re-finance the property in just her name and buy out Bob’s interest.

However, a couple of things will need to be considered before this is possible. First of all Sue will need to satisfy the bank that without Bob she can manage to make payments on the property by herself. It is not just merely a matter of Sue taking over the payments though, in many cases the bank will require Sue to completely re-finance the property in just her name and buy out Bob’s interest.

Another consideration is the trustee’s perspective on the present value of the property, how much the trustee would need Sue to pay, and when she would need to pay it. Sometimes the trustee will need the entire equitable share (Bob’s half) to be paid in full. In other cases the trustee will be happy to take a series of payments and when the complete $50,000 has been paid the house can then be put into Sue’s name keeping their house safe. In this situation, when Bob goes bankrupt his name is removed from the title of the property and the bankruptcy trustee will share the property title with Sue. This makes Sue a co-owner with the trustee meaning the trustee is fully involved in any actions taken with the property, including if it has to be sold.

If you find yourself in a situation where you are needing to go bankrupt and your partner would like to try and retain the property there are a lot of options, this is not the only scenario. Bankruptcy Northern Rivers are available on 1300 795 575 with advice and the experience to guide you through the many bankruptcy possibilities in New South Wales and how they might apply to you.

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

Fast forward a couple of years and Bob and Sue are in financial difficulty and need to declare bankruptcy, what is even worse is that the Northern Rivers house is now worth $150,000 less than what their mortgage is. Bob and Sue are not really concerned about the mortgage due to the fact that they had paid for mortgage insurance. The sad reality is the mortgage insurance is not there to help protect Bob and Sue from any shortfall if the house sells for less than the mortgage, it is actually there to safeguard the bank’s interests. In this situation, the bank will hand any financial shortfall to the mortgage insurance providers if the house sells for less than the value of the mortgage. The mortgage insurance company will then pursue Bob and Sue for the shortfall.

The reason Bob and Sue were required to pay mortgage insurance way-back when they got the mortgage was because they could only come up with a 5% deposit which exposes the bank to greater risk, meaning the mortgage insurance company will require a higher premium. The banks pass on this additional premium cost to the purchaser, which is what Bob and Sue were paying for. In a nutshell, mortgage insurance is not there for you it is there for the bank.

At Bankruptcy Northern Rivers we can assist you to navigate through the minefield of bankruptcy, call us on 1300 795 575 to take the first step.

Bob and Sue have owned their Northern Rivers house for many years and have worked really hard to build up some equity in the property. Their house is presently 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.

Even though they have a reasonable amount of equity in their home Bob and Sue feel they will need to go bankrupt as they cannot draw on any of that equity to pay their other debts. Bob until recently had been the primary income earner in their relationship but, unfortunately, he has lost his job. Since Bob is now unemployed and Sue does not have a very high income their ability to make repayments has been seriously impacted. In this scenario the bank will not be willing to let them borrow against the equity they have in their home.

Another hurdle Bob and Sue have come across has been though they have been struggling to repay debts to a variety of different creditors, there have been some defaults and judgements on their credit report. Once their credit rating dropped it became more difficult to borrow money to cover their different debts. This unfortunate scenario can end up being a vicious circle which can be tough to get out of without considering bankruptcy.

If Bob and Sue only had $18,000 worth of debt and $100,000 equity in the house it is highly likely that their application for bankruptcy would be rejected simply because they have plenty of equity in their house.

If you own a home in NSW and are thinking about bankruptcy you can access some complimentary advice by contacting us here at Bankruptcy Northern Rivers on 1300 795 575 and we can walk you through your options.

In the following case studies we explore the implications when one partner who owns the property files for 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 home in the Northern Rivers 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 very worried about losing his house when he files for bankruptcy, especially considering his partner Sue has actually been contributing financially towards mortgage payments for the last 5 years. In New South Wales the technical term for this situation is called the doctrine of exoneration. What does it mean? Put simply, it means that a person who has financially contributed to a property despite the fact that they are not on the title or mortgage has some claim against the equity in the property should the person who owns the house declare bankruptcy.

In this first case, Sue had actually sold a property before she got together with Bob and she contributed $30,000 towards the deposit of a house for them to reside in. At the time Sue was not working so the property title and mortgage was only put in Bob’s name. Sadly things didn’t work out for Bob and he had to apply for bankruptcy. Despite the fact that it is only Bob’s name on the title and the mortgage of their house, Sue has a legitimate claim to get her $30,000 back. Sue can make a claim to the trustee for her $30,000 to be returned if the property needs to be sold. If Bob and Sue want to hang onto the property Sue’s claim to the $30,000 of equity means Bob now only has $70,000 of equity and not $100,000, possibly making keeping their house a lot more feasible.

In this next scenario Sue can once again have a claim against some of the equity in Bob’s house should he go bankrupt. If Sue has paid 50% of the mortgage over the past 5 years she will be entitled to a percentage of any equity in the property. Even if the title and mortgage for the house is only in Bob’s name.

Should Bob declare bankruptcy, potentially Sue has the ability to claim some of the equity in Bob’s house if they have combined their financial lives. If over the 5 years they have lived together they have shared equally all the household expenses and costs then Sue is entitled to some of the equity in Bob’s home, despite not being on the title. This can even apply if Sue has not specifically made payments towards the mortgage.

Another manner in which Sue could claim some equitable interest in the property is because her name is on the mortgage. When Bob and Sue bought the house they put the title in Bob’s name only as Sue had a very risky profession at the time and was concerned about legal claims against her. However, in order to secure the mortgage for the house both Bob and Sue were listed on the mortgage as they required both their incomes to contribute to purchasing the property. Even though she is not on the title as an owner of the house because she is on the mortgage she is entitled to a proportion of the equity should Bob file as bankrupt.

Sue received a redundancy payout a couple of years ago and contributed $40,000 towards some renovations, new carpet, paint and new bathrooms in the house she lived in with Bob. Although Bob owned the house and had always made all the mortgage payments when he was forced to go bankrupt Sue was able to claim $40,000 equity in the house when it needed to be sold.

As you can see from these case studies, in New South Wales, there are a variety of ways in which a partner can have a claim to equity in a bankrupt partner’s property. Should you be dealing with bankruptcy and not know where you or your partner stand Bankruptcy Northern Rivers can provide you the answers and guide you through the process. Call us on 1300 795 575 to find out how we can help.

Bob is seriously thinking about bankruptcy and feels like he has no choice. He has grave concerns because his wife Sue owns the house that they reside in and he is really concerned about what will happen to that property should he apply for 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.

A common misconception in New South Wales is that if the title of the house you reside in is in your partner’s name then the house will be safe if you declare bankruptcy, however, it is not that simple. This is a situation where it is really about following the money or establishing what money has contributed to the property and whose money that is.

Let us say for example that before Bob and Sue purchased their property they now reside in, Bob owned a little apartment in the city. Bob made a tidy sum of $50,000 when he sold his apartment and he added that towards a deposit for the house he lives in now with Sue. Even though the new property is clearly Sue’s with just her name on the title and the mortgage he has actually still contributed $50,000. What this will mean is that if Bob declares bankruptcy the trustee will ask if he has contributed any money towards the property at any point and as he has in this case the trustee may require that to be paid back towards his debts.

Another situation could be that for the last 5 years Bob and Sue have lived in this property Bob has been paying half of the mortgage every month. Although the property is only in Sue’s name, contributing to the mortgage means that Bob has helped in the ownership of the home. By making regular or lump sum payments to a home loan Bob can be seen to be contributing toward the asset and unintentionally the house also ends up being in part Bob’s asset, despite the fact that he is not on the title.

It can get even more complicated than that, let us say that our couple Bob and Sue have actually been living in Sue’s home for the last five years and have contributed equally to the household bills. They both share equally in paying the mortgage, rates, purchasing food and sharing the expense of household items that need to be bought. In this case the trustee will most likely say that because they have shared their financial lives together for the last 5 years a part of the equity in Sue’s property is actually Bob’s.

A few years ago the entire back patio of the house that is in Sue’s name was rotted out and needed to be replaced. Bob had some money from a redundancy payout from his job so he decided to not only pay for the patio renovations but to also do some of the work himself. By doing this the bankruptcy trustee can again consider Bob to now have some level of equity in Sue’s house.

Another case where Bob may be in difficulty is if his name is on the home mortgage because the bank would not lend Sue the money unless they both signed due to her capacity to make repayments. Despite Bob not putting any money towards the deposit, his name is on the mortgage because he earns money that will help contribute to making the repayments. In this scenario it is quite easy for the bankruptcy trustee to see that the house is in both Bob and Sue’s names and both have contributed towards the property and therefore towards any equity in the property. It could be that up to 50% of the equity in the house is classed as Bob’s.

If you are in a scenario where you live in a property owned by your partner and have approaching bankruptcy worries give us a call for helpful advice. These case studies are by no means the whole story, there are a lot of other scenarios that need to be considered and getting the right information is essential. By giving Bankruptcy Northern Rivers a call here on 1300 795 575 to find out how we can help.

In NSW the name or names on the title of a property are really important in bankruptcy, however, it is not the be all and end all. For instance, some of our clients call and ask if they can alter who is on the title of their property to attempt to protect that property before they go bankrupt. In this case of Bob and Sue, Sue owns the house and needs to go bankrupt and she has some equity in the house. They don’t want 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.

The question is, will this action safeguard their property in any way when Sue files for bankruptcy? In short, the answer is no; they cannot merely just transfer the name of the title and after that magically have a new owner appear. The main reason why this is not possible is that Sue needs to divulge any gifts or transfers of property when she goes bankrupt. When the trustee sees this transfer they will just say that Sue has done this purely to defeat creditors or to not pay her bills when she declared bankruptcy. This strategy won’t work in New South Wales and it really is just a waste of time.

We described in a previous case study, a couple who had been residing together in a property for a great length of time entering bankruptcy with only one partner’s name on the house title. As shown in that scenario, even if your name is not on the title you may well be liable for some of the equity in that property. So, names on titles do have a purpose when dealing with bankruptcy but they are definitely not a guarantee of security for your asset. Bankruptcy is really simply a matter of following the money, it is about equity asset value and who has paid what over what amount of time. These sort of numbers and these sorts of calculations are more the philosophy behind how assets are determined when you declare bankruptcy instead of just names on titles or mortgages.

If you wish to know more about titles of property and how bankruptcy will impact it, do not hesitate to call us here at Bankruptcy Northern Rivers on 1300 795 575 and we will walk you through it. Do not assume that you have it all covered this is a very complex area of bankruptcy law and you can easily get it wrong.

Bob and Sue have owned a property for several years, have worked really hard and have $200,000 equity in their home. 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 outlet who have actually been really patient with Bob and are aware of his situation. However, they are simply not able to wait anymore, so to make sure that they get their payment for the account they have placed a caveat over Bob and Sue’s property.

Generally, as a mortgage holder you will be informed from your creditor that a caveat has been put on your property and you may also be contacted by the land titles office. What this means for Bob and Sue now is if they sell their property for $700,000 and they still owe the bank $500,000 the caveat for $150,000 will now enter into effect. Effectively the maths from the sale of their house will be, they pay the bank $500,000 mortgage, then pay the hardware store the $150,000 caveat leaving Bob and Sue with $50,000.

What happens to a caveat when you go bankrupt? Well the truth is not too much, although Bob and Sue are not required to pay the hardware store as a result of going bankrupt this does not automatically remove the caveat. So, what needs to happen is Bob and Sue need to go through the process of the bankruptcy and at the end of the 3 years the debt for the hardware store will be removed and they will no longer owe the hardware store the $150,000. They can then ask for the hardware store to remove the caveat as this does not automatically happen. If they won’t Bob and Sue may need to get some legal advice to force them to do so.

This is, obviously, a very simple explanation of how caveats work in New South Wales, there is a lot more to it than we have briefly outlined. This example is not legal advice, it is simply just an example of how caveats work. Please do not hesitate to seek your own independent legal advice about caveats if you have one on one of your properties because it is a very important issue and there are often complications.

There are various circumstances and scenarios that can be considered in the case of a caveat, if you want to know more about them and how they can impact bankruptcy feel free to call us here at Bankruptcy Northern Rivers any time on 1300 795 575.

Bob and Sue have made a decision to file for bankruptcy and have decided that because they own their family house they do not want to lose it. Nevertheless, Bob and Sue can no longer afford to make the payments and pay the other costs associated with home ownership. Instead of simply selling their home out on the open market Bob’s uncle has decided he wants to purchase the property. The question is, in New South Wales can Bob and Sue legally sell their property to a relative before they go bankrupt? The answer is yes, in some cases. Where people go very wrong in this situation is selling their home to a family member, or someone they know, at a heavily reduced rate. This triggers all sorts of problems not only for the people filing for bankruptcy but also for the person who buys the property.

Let us say that Bob and Sue’s house is worth $700,000 and they owe the bank $600,000. They decide to sell the property to Bob’s uncle Joe for $600,000, believing that will clear their mortgage debt and Uncle Joe gets a bargain. The problem here is the bankruptcy trustee will ask what the market value of the property was when they sold it. Bob and Sue will tell them it was worth $700,000 and the trustee will tell them that they should have sold it to Uncle Joe for the full $700,000. In this situation the bankruptcy trustee will instruct Uncle Joe to pay the bankruptcy estate the $100,000 discount that he thought he had saved buying Bob and Sue’s property. To protect themselves from the possibility of selling their house too cheaply before they went bankrupt, Bob and Sue really should have had an independent valuation done on the property before it was sold. They should also have ensured that the transaction was done properly using a solicitor or conveyancer to help them with the sale. If you are looking at selling your home to a family member prior to bankruptcy don’t try anything tricky, keep it a strictly commercial transaction the same as if you were selling to a stranger.

These are just the basics of selling a home to a family member prior to declaring bankruptcy. This process is usually a lot more complicated, so if you would like to learn more feel free to call us here at Bankruptcy Northern Rivers on 1300 795 575.

Bob and Sue have made the very hard decision to file for bankruptcy, the biggest concern is their family home on which they have a mortgage for $670,000. Their home is valued at $700,000 so they have $30,000 equity in the property.

So, in NSW, what will happen to their house when they declare 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.

Bob and Sue have decided they desperately wish to keep their home even though it has some equity in it. When Bob and Sue initially filed for bankruptcy they owed $300,000 in debt to banks, credit cards, tax and a whole range of different creditors. For Bob and Sue to keep their home in bankruptcy there are 2 options. The first option is to just pay the trustee at the start of bankruptcy a lump sum of $30,000 to make up for the shortfall between the house value and the house mortgage. To do this they would need to get the $30,000 from a friend, relative or somebody else because as a bankrupt they do not have any money. Paying the trustee $30,000 at the start of the bankruptcy will settle and satisfy the creditors that they have gotten the value of the equity out of the property and everybody is happy.

The second option if they don’t have access to $30,000, they can as bankrupts enter into a payment plan with the trustee, paying off the $30,000 over the three year duration of their bankruptcy. At the end of their bankruptcy providing of course the house has not increased in value and their equity is still not more than that $30,000 the creditors will be satisfied and they can retain their house.

This payment arrangement does not automatically happen if you have some equity in your property and you declare bankruptcy. Bankruptcy in New South Wales is a complicated complex procedure that you need to be very careful entering in to, particularly if you want to keep a family home in which you have some equity.
If you wish to keep your house in bankruptcy you can get sound professional guidance from us here at Bankruptcy Northern Rivers. Call us on 1300 795 575and we can walk you through your options.

There is a general presumption 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 very careful about this assumption.

In this case study Bob and Sue have been married for 15 years but their home is solely 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 apply for bankruptcy.

In this particular scenario it is most likely that the trustee will view some of the equity in the property as Bob’s even though he’s not on the title or mortgage. The reason for this is simply because they have both contributed to household expenses and have been living together financially for the last 15 years. Although not necessarily documented on paper Bob has actually contributed to the maintenance of the house while living together in it.

So, Bob and Sue have lived together in Sue’s house for 15 years and the property is worth $700,000. The bank is still owed $500,000 so Sue has $200,000 equity in the property. In this scenario the trustee could well say that of the $200,000 equity half of that or $100,000 is actually Bob’s because they have both lived there for 15 years. This is the worst case scenario. If it can be clearly established that Sue has contributed solely to the mortgage and household costs and Bob has not, it demonstrates a genuine imbalance. In this case it can be established that the equity in the house is not half and half even though Bob has lived there for 15 years he potentially only has 10% or 20% of calculated equity. This is not locked in stone. This is something that needs to be worked out and is calculated at the time of bankruptcy.

If, for instance, Bob had just moved in with Sue 6 months earlier and she had owned the house for many years prior to their relationship and him moving in, this would be treated very differently. The simple reason being that there is very little history of them both living in the same property. In this scenario it is quite likely that Sue will be able to retain full equity in the house and there will be no problems at all.

Please do not automatically presume at any point that because your partner’s name is on the title and mortgage that your house is safe, that is not always the case. In NSW establishing equity in a property needs to be proven rather than through just taking your word for it. Things like mortgage statements, bank statements, payslips and other paperwork may be required.

Here at Bankruptcy Northern Rivers we have the experience to walk you through establishing your property equity, call us on 1300 795 575 so we can assist you through the process.

Bob and Sue have come to the difficult decision to file 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 decide to surrender their home to the bank. The very first thing we at Bankruptcy Northern Rivers would do for them is get them to sign a legal document which resembles a deed of release meaning they have voluntarily surrendered their home. This means the bank does not need to pursue legal action to have them removed from the house. Bob and Sue would then vacate the property, although sometimes the bank may ask the residents to stay on and live in the property to assist them in selling it.

The reality is the bank that lent Bob and Sue the money for the house is not concerned whether they declare bankruptcy or not. The bank will always get their money for the property because they have the loan secured against the property or another comparable asset and can potentially sell it at any point to get the money. In Bob and Sue’s case their home is sold and it turns out that it sells for $150,000 less than their mortgage, the bank will then ask Bob and Sue to pay the $150,000 shortfall. If Bob and Sue are bankrupt the $150,000 then just goes onto their bankruptcy paperwork, this does not have to happen prior to declaring bankruptcy or at the beginning of bankruptcy in fact it can take place at any time throughout the 3 years. Sometimes, properties may take a year or two to sell so this process will just happen as a part of the bankruptcy process. If the housing market is really bad and the property does not sell then it is still not Bob and Sue’s problem, even after the three years of bankruptcy the problem is still the banks and they will deal with the asset or the house whenever they can.

In New South Wales when you surrender your home to the bank there is a false presumption with some mortgage holders that as they have actually paid for mortgage insurance this will somehow secure them from any shortfall if the bank sells the house. This is absolutely not the case, in fact mortgage insurance is not there for you as the mortgage holder it is there for the bank to secure its mortgage. If you fail to pay your mortgage the bank will simply hand over to the mortgage insurance company and the bank will get its money for the house. When the house is sold the mortgage insurance company will then come after you for any shortfall. The only time you can have your mortgage wiped out is once you are bankrupt and the house is sold making the debt unsecured.

The minute Bob and Sue surrender their property to the bank or to the bankruptcy trustee whether they are in bankruptcy or not they will no longer be responsible for the rates or the maintenance or the upkeep or even the insurances on that property. They are basically no longer the owners of the property and can simply walk away.

If you want to declare bankruptcy in NSW and are worried about what will happen if you walk away from your house, do not hesitate to call us here at Bankruptcy Northern Rivers on 1300 795 575 and we will take you through your options.

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

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 Adelaide 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 requires the wheelchair access installed at the property.

The question is can they sell the property to Granny to keep the property so that they can stay on there as tenants after bankruptcy? In SA the short answer to this question is yes, if done correctly.

Our couple, Bob and Sue, decide to cover their mortgage commitment and at the same time look after Granny giving her a bargain, selling her the house for $650,000. They know full well that it is actually worth $700,000 and that they are selling their home to Sue’s grandmother for less than market rate. In this circumstance the sale might end up being a huge problem for Bob and Sue. They have essentially avoided paying their creditors $50,000 of equity that the creditors should have been given if the property was sold at a fair market rate. To safeguard themselves against this mistake Bob and Sue really should have had a registered real estate valuer assess their property to figure out the true market value, prior to selling to Sue’s grandmother at that established amount.

So, as you can see in this scenario the problem was not that they sold the house to a relative, the issue was that they sold it to a family member at less than market value.

In this situation another trap that Bob and Sue might easily fall into is attempting to transfer the title of the house prior to bankruptcy. Let us say that Bob and Sue desperately wish to keep their home, however, Sue’s grandmother is on a pension, has no savings and no capability to borrow any money. As Granny is unable to purchase the property from them Bob and Sue choose to transfer the ownership or the title to Sue’s grandmother before they declare bankruptcy hoping that this will protect them from losing their home. This situation is considered the same as if Bob and Sue gifted the property to Granny, it does not work merely changing whose name is on the title in bankruptcy, it is about following the money. In bankruptcy just changing the ownership title on a home or property will do nothing to protect it from being sold as an asset.

If it looks like you might be heading towards bankruptcy and you have questions about your home, give Bankruptcy Experts Adelaide a call on 1300 795 575 for all the answers.