Bankruptcy and the Family Home

Is the family home safe if you declare
bankruptcy?

Surprisingly, and quite often, the house can be saved even though you go bankrupt. Before we raise your hopes however, you will need to have all your paperwork together and organise a meeting with Fast Debt Help to explore your unique situation. At that point it will be clear what the outcome will be.

Bankruptcy Trustee

When you go bankrupt you will get a bankruptcy trustee. Not all trustees will try and save the house, as the trustee definitely has the power to take action and sell the house, which is an asset of your bankruptcy.

It’s important that you know that whoever your bankruptcy trustee is, they are obliged to get cash into the bankruptcy for your share of the net equity in the house. But that  money, can come from somewhere else.

Case Study Examples

Single Name Bankrupt

Let us consider your house has a current market value of $400,000 and your mortgage is $350,000.

Your equity then is the $50,000 balance.  That’s the figure (ignoring selling and legal costs in these examples) that the bankruptcy trustee will be looking for to go into the bankruptcy, in cash.  He’s obliged to do that.

Joint Name Bankrupt - one partner

Let’s now consider that the house is in joint names, and that the other joint owner is not going bankrupt.  Subject to certain bankruptcy rules and tests we will presume here that the joint owner would therefore have half of this net equity, ie, $25,000.  If the house was sold, then the other joint owner would get a cheque for $25,000 as it’s not part of the bankruptcy.

The bankrupt’s share of the sale proceeds would go to the bankruptcy trustee to pay into the bankruptcy.  Ultimately it will provide some funds for your bankruptcy to pay back to your unsecured creditors.

The question is, rather than force a sale, can your bankruptcy Trustee accept the $25,000 which is your share, off somebody else, and so release the house from the bankruptcy?
In most cases that we handle, the answer is YES.

Joint Name Bankrupt - both partners

If both joint owners go bankrupt, can the bankruptcy trustee accept the $50,000 joint equity from somebody else, and so release the house from the bankruptcy?  Again, in most cases that we handle, the answer is YES.

Does the $25,000 or $50,000 have to be paid up front to the bankruptcy?  Well, without giving away trade secrets, let me just say sometimes yes, sometimes no.

When we talk about joint ownership of the house, there are some rules in bankruptcy which will be followed so as to determine from a bankruptcy perspective the real equity ownership of each joint owner.

Bankruptcy and the Family Home

The good news is that quite often in bankruptcy, the house can be saved.

Even in cases where there is no equity in the house, there are circumstances where it can still be saved.

In all of this, if the house is going to be saved then you must continue to meet the mortgage repayments.  Other debts like credit cards, store cards, taxation debt and unsecured personal loans will still be cancelled by your bankruptcy. Your Mortgage payments may be affordable without having to pay other debt. This could put you in a position to salvage the house.

THE GOOD NEWS IS
  • It doesn’t matter where you are in Australia, or what type of property you own
  • Your mortgage arrangements won’t be changed, there are actually very few hassles
  • Fast Debt Help have secured a lot of houses for owners who have gone through bankruptcy

If these examples resonate with you, we would love to help you. Don't take anything for granted, there may be options Fast Debt Help can assist with. Call us on 1800 825 010, Click Here to start the conversation with us, or fill out the form on this page.

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