House Has $30k or More in Equity
Bob and Sue have made the very difficult decision to apply for bankruptcy, the biggest concern is their family home 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 the Northern Territory, what will happen to their house when they apply 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 does not make any difference the principle is the same.
Surrendering the House to the Bank.
Bob and Sue have come to the tough 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 Experts Darwin would do for them is get them to sign a legal document which is like 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.
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 house is valued at $700,000 and they presently have about $500,000 on their mortgage.
Bob is a builder in the NT and has really been having a hard time since he injured his back. He owes $150,000 in unpaid accounts to a particular hardware store who have been really patient with Bob and understand his situation.
When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.
Bob is seriously considering bankruptcy and feels like he has no choice. He has grave concerns because his wife Sue owns the Darwin house that they live in and he is really concerned about what will happen to that property should he file 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.
Why Would You Go Bankrupt If You Had Equity In Your House?
Bob and Sue have owned their Darwin home for many 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 home.
But I Have Mortgage Insurance?
Five years ago when Bob and Sue were wanting to buy a home in the NT all they could manage to pull together was a deposit of 5%. When they bought 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 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 home earlier.
I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?
Let us take a look at 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 went bankrupt they decided that they wished to try and keep their Darwin house after bankruptcy. At the time they declared bankruptcy the house was worth $700,000 and they still owed the bank the full $700,000.
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 chosen 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?
I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?
Bob and Sue have been living in their family house for several 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 decides to apply for bankruptcy is that compensation money safe or will he lose it?