Bankruptcy in Perth is a complicated process, but I recognize from meeting with thousands experiencing the possibility of going bankrupt for many years that the most terrifying facet is the fear of losing the family residence.
Nearly everyone is on an emotional level linked to their house – it’s where the little ones have grown, it’s where you sleep, eat, relax and built it from a house to a home. So it is terrifying to feel that a thing like bankruptcy can sweep in and take all of that off you.
So, Will you lose your home if you go bankrupt?
My response is ‘possibly’ – I understand it is not a practical response, but it will really depend upon your particular conditions. People typically believe that losing your house is inevitable and just an additional part of Bankruptcy– but don’t make yourself mad just yet, as there might be hope.
So how does bankruptcy view my house?
The very first thing to know is that houses are considered as assets – but no two homes will be the same. What you should understand is that whenever it concerns Bankruptcy, they appoint a trustee to oversee the process. Their task is to make sure that they can settle as much of your liabilities with your asset. This is completed through equity – and if there is no equity in your home then there is no true advantage to selling it.
Trustees not selling homes is occurring considerably more ever since the GFC as house prices in many areas have been heading south so what you spent 4 years ago may not immediately reflect the price these days.
But the biggest part with Perth and Bankruptcy is that you truly should get an expert to assist you through this process, there are plenty of factors in these scenarios that should be considered.
As an example, if you have no equity in your home you will need to take into account your bank loan. With loans, you are essentially just a customer of the financial institution and they will similarly have a preference– will they wish to get your home back, or do they want you to keep the loan? You might feel that they would wish to just take the house to avoid the risk, but frankly financial institutions are run as a business, and if they can leave you with a home loan to keep generating income off you, they generally will provided that you keep up to date with your monthly payments. However it is still up to the trustee to establish that there is lots of equity in your home the trustee will push you and the bank to sell your home.
What is my home worth?
Typically with Bankruptcy it is difficult to know what your house is actually worth– yes, you may have an idea if you were selling your house, but the manner in which this is calculated in insolvency is generally varied. When you declare bankruptcy you may have to note down the value of the house, and the amount of money that you owe– and you can figure this out by utilizing a valuer. This is going to be far more precise than using your ‘gut feel’ or a real estate agent. The other important factor is that you need to ask your valuer for two values– one for a Quick Sale, and one for a non-time sensitive sale. This will certainly give you 2 rational numbers that can guide you to effectively value the property and realise its value even if you are being pressed to sell swiftly.
When it comes to Bankruptcy and properties, an additional significant consideration is ownership, in many cases homes are purchased in joint titles. In other words a couple may have bought a house 50/50 making use of both of these incomes to make the payments. If one party declares insolvency and the other party does not, the equity is solely factored on the 50 % of the property. With Bankruptcy, this is just one of probably numerous situations that are probable when it is in regards to the family home. Remember the non-bankrupt party can purchase the bankrupt’s part of the home in insolvency also. I must repeat this but get some advice on this area of Bankruptcy since it is very tricky and every case is different.
If you really wish 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.