Bankruptcy And The Family Home
Can I Keep My House
With No Equity?
Bob and Sue reside in Tasmania and own their family home. Times have actually not been very good and they have decided to apply for bankruptcy. They are extremely worried about what will happen to their house. In this particular case study, we will look at what actually happens in Tasmania 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 house. 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
Bob and Sue have made the very tough decision to apply for bankruptcy, the biggest concern is their family house 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 Tasmania, 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 Is Owned By
One Partner?
There is a general assumption in Tasmania 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 declares bankruptcy. This is not the case and you need to be extremely careful about this assumption.
In this case study Bob and Sue have been married for 15 years but their home is entirely in Sue’s name. Bob’s name is not on the title or on the mortgage but they have both resided 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 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 choose to surrender their house to the bank. The very first thing we at Bankruptcy Experts Hobart 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 need to pursue legal action to have them removed from the house.


Selling the House to a Family Member Prior to Bankruptcy, Is It Legal?
Bob and Sue are coming to the realisation that at some point in the future they will probably need to apply for bankruptcy but they own their family home. Bob and Sue are thinking of possibly selling the house prior to declaring bankruptcy so that they don’t lose the money from the sale of the property when they go bankrupt. The question we often get asked here at Bankruptcy Experts Hobart is whether that is legal to do or are you doing something wrong.



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 home. Their home is valued at $700,000 and they presently have about $500,000 on their mortgage.
Bob is a builder in TAS and has really been struggling due to the fact that he injured 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.



Names on House Titles
In Tasmania 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 change who is on the title of their property to attempt to protect that property before they declare bankruptcy. 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 wish to lose the house so to safeguard it Bob and Sue decide that Sue should transfer the title to Bob’s name and take her name off of the property.



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?
If you are considering bankruptcy, being able to answer these questions is vital. Then you’ll know exactly what will happen to your business and assets should you choose to file for bankruptcy. Feel free to download our eBook for free and inform yourself today. Or, if your questions are more complex, call us directly on 1300 795 575.





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When The House is in Your Partners Name and They Don’t Need to Go Bankrupt.
Bob is seriously considering bankruptcy and believes that he has no choice. He has grave concerns because his wife Sue owns the Hobart house that they reside in and he is extremely 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 Name, You Need To Go Bankrupt And Your Partner Has Contributed To The House.
In the following case studies we explore the ramifications when one partner who owns the property applies 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 Hobart house 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 declares bankruptcy, especially considering his partner Sue has been contributing financially towards mortgage payments for the last five years.



Why Would You Go Bankrupt If You Had Equity In Your House?
Bob and Sue have owned their Hobart home for several years and have actually worked really hard to build up some equity in the property. Their home 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.



Can I Sell My House To A Family Member Before I Go Bankrupt ?
This is a question that, on the surface of it, sounds terribly risky, however it is not if you understand what you are doing and things are done 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 want to hold on to the Hobart property as it has some sentimental value and some practical implications as Sue’s grandmother resides in a granny flat out the back and their disabled daughter requires the wheelchair access installed at the property.
But I Have Mortgage Insurance?
Five years ago when Bob and Sue were aiming to purchase a home in Tasmania 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 purchase a house earlier.


What If My Partner Wants To Buy My Share of the Property When I go Bankrupt?
Bob needs to go bankrupt however his partner Sue does not. They own a Hobart house together worth $700,000 and they have $100,000 equity in the house. Bob has acknowledged 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 wish to lose the family home that they have worked so hard to keep.
Bob and Sue need to find out 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. The answer is yes, possibly. When Bob goes bankrupt 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.



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 Hobart home after bankruptcy. At the time they went bankrupt the house was worth $700,000 and they still owed the bank the full $700,000.



What If I Can Not Keep Paying the Mortgage Halfway Through My Bankruptcy ?
Bob and Sue declared bankruptcy eighteen months ago with no equity in their family home. They had decided they would attempt 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 quite 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 few financial obstacles and have made a decision to go bankrupt. 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 leave the property?


Surely I Can Keep
The Family Home If I Go Bankrupt?
Bob and Sue have finally faced the reality of going bankrupt and they, like a great deal of people confronting bankruptcy, are thinking surely we will not lose our family home, we need to live somewhere.
Sadly, in many bankruptcy situations, as we have seen in these case studies, keeping your home is not an easy process. Many times it is simply not possible. Keeping your house in bankruptcy is all about the money, it is not about the nostalgic value, emotional value or your own particular circumstances it is an extremely cut and dry process.
What If My House Was Purchased With an Inheritance?
Bob and Sue have been living in their Hobart 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 need to file for bankruptcy? In Tasmania 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.


I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?
Bob and Sue have been residing in their family house for many years. About five years ago Bob had a serious accident at work, he got a big 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?


Will I Still Have to Pay Rates, Insurance and Body Corp If I Go Bankrupt?
Bob and Sue are applying for bankruptcy and have come to the heart-breaking decision to leave their Hobart 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 normally remove Bob and Sue’s names from the title and put the trustee’s name in their place, then the house is simply 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.
Can I Keep My House with No Equity?
Bob and Sue reside in Tasmania and own their family home. Times have actually not been very good and they have decided to apply for bankruptcy. They are extremely worried about what will happen to their house. In this particular case study, we will look at what actually happens in Tasmania 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 house. So, what will actually happen to Bob and Sue’s house now that they are going to declare bankruptcy?
On filing for bankruptcy, Bob and Sue will put all the information about their mortgage and house value in the required paperwork when they lodge the bankruptcy application. A few weeks after they have filed for bankruptcy the trustee will write them a letter to ask them to potentially verify the market value of the property. This is to ensure that it is crystal clear whether or not there is actually any equity in the house. This normally will happen within the initial month of bankruptcy.
Once the market value of the property has been determined Bob and Sue have a few choices. The first choice when bankrupt is that they can walk away from their property and no longer be obliged to pay the mortgage. Walking away is something they do not have to necessarily decide straight away when they declare bankruptcy, it can be revisited down the track. If the mortgage gets too much and they find that they just can’t keep it up, at this moment they can still hand the house back to the bank and walk away. In either case because they are bankrupt when the property is sold by the bank, they will not be responsible for any shortfall from the sale.
The second choice they have if they have no equity in their home, is to keep it. If they decide to keep their home while bankrupt because they really love it and it is where they have raised their family, then they can simply continue to pay the mortgage, rates, insurances and the maintenance of the property. This will enable them to keep their home for the 3 years they are bankrupt. At the end of the bankruptcy period the house will be revalued. If for example, the house market value, of $700,000, has not increased in the three years they are bankrupt, then the trustee can offer the house title back to Bob and Sue. There will be some fees to cover the costs to transfer the title and some legal requirements which generally come to less than $5000. On payment to the trustee of these fees the house will return into the names of Bob and Sue and they will continue to keep their property after their bankruptcy.
However, as another example, let us just presume that over the three years bankruptcy Bob and Sue’s house has increased in value by $100,000. Now the house is worth $800,000 but the mortgage owing is still basically $700,000. What will now occur is the trustee will say to Bob and Sue if you would like to keep your house you can, but you will need to pay your bankrupt estate the $100,000 dollars equity that has been gained in the property over that 3 years and then you can continue to keep the house. Let us just change that $100,000 increase in value and say that their home has only increased by $30,000 in equity since they went bankrupt, in this case they just pay the $30,000 to the trustee and ultimately the creditors, then they get to keep their house.
Bob and Sue at the end of their three year bankruptcy period do still have the choice to walk away from the house if they decide they do not wish to live there anymore. They can simply hand the house back to the bank and the bankrupt estate. Once Bob and Sue’s bankruptcy has been finalised their home will then either be put back into their names if they want to keep it or sold should they want to walk away.
Remember Bob and Sue can keep their home while they’re bankrupt as long as there is no equity in it at the time they start their bankruptcy and that they settle any increase in equity during the bankruptcy. By continuing to pay the mortgage, rates and insurances, settling any added equity, paying legal and transfer costs and a fee to the trustee they will keep their house.
If you want to know more about declaring bankruptcy in Tasmania and keeping your home do not hesitate to call us here at Bankruptcy Experts Hobart on 1300 795 575
Will I Still Have to Pay Rates, Insurance and Body Corp If I Go Bankrupt?
Bob and Sue are applying for bankruptcy and have come to the heart-breaking decision to leave their Hobart 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 normally remove Bob and Sue’s names from the title and put the trustee’s name in their place, then the house is simply 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 declaring bankruptcy that is a totally different matter. If they stay on in their home they will still be responsible for any body corporate costs, rates, insurances, and any other expenses related to home ownership.
If you are not too sure exactly where you stand with your rates or other household expenses when declaring bankruptcy, do not hesitate to call us here at Bankruptcy Experts Hobart on 1300 795 575 for knowledgeable and appropriate guidance.
I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?
Bob and Sue have been residing in their family house for many years. About five years ago Bob had a serious accident at work, he got a big 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 ensure you get some proper advice before you apply for bankruptcy. Don’t just take what we say here as gospel because there are a lot of variables in this quite tricky situation.
After his accident at work Bob received $200,000 in compensation, he put the full $200,000 towards his house which is worth $700,000, he and Sue now only owe the bank $500,000 Bob and Sue have decided to declare bankruptcy and there is effectively $200,000 equity in the property.
In Tasmania compensation money acquired as a result of an accident is typically considered safe and protected when you apply for bankruptcy. In this situation Bob’s compensation money that he put towards the house is safe even though he has actually declared bankruptcy. 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 living 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 instance, to a health problem it can be quite complicated.
If you are looking at going bankrupt in TAS, before you do anything give us a call here at Bankruptcy Experts Hobart on1300 795 575 for professional assistance and guidance.
What If My House Was Purchased With an Inheritance?
Bob and Sue have been living in their Hobart 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 need to file for bankruptcy? In Tasmania 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 can 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 declare bankruptcy, they are not.
To learn more about inheritance moneys and how they, and other assets, are affected by bankruptcy, call Bankruptcy Experts Hobart on 1300 795 575.
Selling the House to a Family Member Prior to Bankruptcy, Is It Legal?
Bob and Sue have made a decision to file for bankruptcy and have decided that because they own their family home they do not want to lose it. Nevertheless, Bob and Sue can no longer afford to make the payments and pay the other costs that come with home ownership. Instead of just selling their home out on the open market Bob’s uncle has decided he wants to buy the property. The question is, in the ACT can Bob and Sue legally sell their property to a family member before they go bankrupt? The answer is yes, in some cases. Where people go really wrong in this situation is selling their house to a family member, or someone they know, at a greatly reduced rate. This triggers all sorts of problems not only for the people applying for bankruptcy but additionally for the person who purchases 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, thinking that will clear their mortgage debt and Uncle Joe gets a bargain. The issue 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 scenario the bankruptcy trustee will instruct Uncle Joe to pay the bankruptcy estate the $100,000 discount that he believed he had saved buying Bob and Sue’s property. To safeguard themselves from the possibility of selling their house too cheaply before they declared bankruptcy, Bob and Sue should have had an independent valuation done on the property before it was sold. They should also have made sure that the purchase was done correctly using a solicitor or conveyancer to help them with the sale. If you are considering selling your house to a member of the family prior to bankruptcy do not attempt anything tricky, keep it a strictly commercial transaction the same as if you were selling to a complete stranger.
These are just the basics of selling a home to a member of the family prior to going bankrupt. This process is usually a lot more complicated, so if you want to know more do not hesitate to call us here at Bankruptcy Experts Canberra on 1300 795 575.
Surely We Can Keep Our Family Home When I Go Bankrupt?
Bob and Sue have finally faced the reality of going bankrupt and they, like a great deal of people confronting bankruptcy, are thinking surely we will not lose our family home, we need to live somewhere.
Sadly, in many bankruptcy situations, as we have seen in these case studies, keeping your home is not an easy process. Many times it is simply not possible. Keeping your house in bankruptcy is all about the money, it is not about the nostalgic value, emotional value or your own particular circumstances it is an extremely cut and dry process. 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 Tasmania, no matter what your circumstances, if you have a home that you have equity in then it is under threat when you go bankrupt.
If you need some guidance about your family house or anything to do with bankruptcy feel free to call us here at Bankruptcy Experts Hobart on 1300 795 575. We will walk you through all your bankruptcy options and what you can do with your home.
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 few financial obstacles and have made a decision to go bankrupt. 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 leave the property?
The good news is, it is not as quick as you might think. Every circumstance is different depending on the banks, the bankruptcy trustee and the individuals but basically Bob and Sue do not need to panic, they will not need to be out the next week or anything crazy like that. Leaving your house is usually quite a reasonable process and in some cases the bank may even ask you to stay 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 probably want them out sooner rather than later. Either way, once they go bankrupt Bob and Sue will have time to find and move into a new place to live.
If you are worried that you are going to lose your house because of bankruptcy call us at Bankruptcy Experts Hobart on 1300 795 575 and we can guide you through your options.
What If I Can Not Keep Paying the Mortgage Halfway Through My Bankruptcy?
Bob and Sue declared bankruptcy eighteen months ago with no equity in their family home. They had decided they would attempt 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 quite 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 simple, 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 scenario of course so if would like more information on what you might need to do in this bankruptcy scenario, give Bankruptcy Experts Hobart call on 1300 795 575.
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 Hobart home after bankruptcy. At the time they went bankrupt 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 additional action regarding the property. Bob and Sue could stay 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 three year bankruptcy period.
If you keep 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 actually 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 retain ownership of the property until 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 initially 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 not easy, especially when you have been bankrupt, it might take Bob and Sue two or three years to come up with $80,000. In this circumstance the trustee would continue to keep the house in the trustee’s name past the 3 year period of bankruptcy, this enables Bob and Sue to pay off the $80,000 gain in equity and so keep their house.
In Tasmania there are a lot of other reasons why a trustee may continue to keep the house locked into the bankruptcy process beyond the 3 years but essentially it all boils down to money like most things in bankruptcy you just need to follow the money.
Believe it or not it is very easy to have your home tied up in the bankruptcy procedure for a number of years well after your release from bankruptcy. If you have a home in TAS and would like guidance on how you might be able to keep your property in bankruptcy, call us at Bankruptcy Experts Hobart on 1300 795 575. We can help you work through what your alternatives are and how you can best avoid any complications.
But I Have Mortgage Insurance?
Five years ago when Bob and Sue were aiming to purchase a home in Tasmania 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 purchase a house earlier.
Fast forward a few years and Bob and Sue are in financial trouble and need to file for bankruptcy, what is worse is that the Hobart house is now worth $150,000 less than what their mortgage is. Bob and Sue are not really worried about the mortgage due to the fact that they had paid for mortgage insurance coverage. The sad reality is the mortgage insurance is not there to help safeguard Bob and Sue from any shortfall if the house sells for less than the mortgage, it is in fact there to protect the bank’s interests. In this circumstance, the bank will hand any financial shortfall to the mortgage insurers if the house sells for less than the value of the mortgage. The mortgage insurance provider 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 greater 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 Experts Hobart we can help you navigate through the minefield of bankruptcy, call us on 1300 795 575 to take the initial step.
Why Would You Go Bankrupt If You Had Equity in Your House?
Bob and Sue have owned their Hobart home for several years and have actually worked really hard to build up some equity in the property. Their home 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 house Bob and Sue feel they will need to declare bankruptcy as they cannot draw on any of that equity to pay their other debts. Bob until recently had been the main income earner in their relationship but, unfortunately, he has lost his job. Because 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 agree to let them borrow against the equity they have in their home.
Another hurdle Bob and Sue have encountered has been though they have been struggling to pay back debts to a range of different creditors, there have been some defaults and judgements on their credit report. When their credit rating dropped it became harder to borrow money to cover their various debts. This unfortunate circumstance can end up being a vicious cycle which can be difficult to get out of without contemplating bankruptcy.
If Bob and Sue only had $18,000 worth of debt and $100,000 equity in the house it is very likely that their application for bankruptcy would be declined simply because they have plenty of equity in their home.
If you own a home in Tasmania and are considering bankruptcy you can access some totally free advice by contacting us here at Bankruptcy Experts Hobart on 1300 795 575 and we can walk you through your options.
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 explore the ramifications when one partner who owns the property applies 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 Hobart house 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 declares bankruptcy, especially considering his partner Sue has been contributing financially towards mortgage payments for the last five years. In Tasmania 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 even though 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 sold a property before she got together with Bob and she contributed $30,000 towards the deposit of a house for them to live in. At the time Sue was not working so the property title and mortgage was only put in Bob’s name. Unfortunately things didn’t go well for Bob and he had to file for bankruptcy. Although it is only Bob’s name on the title and the mortgage of their home, Sue has a genuine 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, potentially 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 file for bankruptcy, potentially Sue has the ability to claim some of the equity in Bob’s home 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 might 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 home mortgage as they needed 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 percentage 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 actually always made all the mortgage payments when he was required 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 Tasmania, 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 facing bankruptcy and not know where you or your partner stand Bankruptcy Experts Hobart can provide you the answers and guide you through the process. Call us on 1300 795 575 to find out how we can help.
When the House is in Your Partners Name, and They Don't Need to Go Bankrupt.
Bob is seriously considering bankruptcy and believes that he has no choice. He has grave concerns because his wife Sue owns the Hobart house that they reside in and he is extremely 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.
A common misconception in Tasmania is that if the title of the home you live in is in your partner’s name then the house will be safe if you go bankrupt, 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 instance that before Bob and Sue purchased their property they now live 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 only her name on the title and the mortgage he has actually still contributed $50,000. What this will mean is that if Bob goes bankrupt 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 toward his debts.
Another situation could be that for the last five years Bob and Sue have resided in this property Bob has been paying half of the mortgage each month. Even though 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 partly 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 house for the last five years and have contributed equally to the household bills. They both share equally in paying the mortgage, rates, buying food and sharing the cost of household items that need to be purchased. In this case the trustee will more than likely say that because they have actually shared their financial lives together for the last 5 years a portion of the equity in Sue’s property is in fact Bob’s.
A couple of years ago the entire back patio of the house that is in Sue’s name was rotted out and needed to be changed. Bob had some money from a redundancy payout from his job so he decided to not only pay for the patio area renovations but to also do some of the work himself. By doing this the bankruptcy trustee can once again consider Bob to now have some amount of equity in Sue’s home.
Another case where Bob may be in trouble is if his name is on the mortgage because the bank would not lend Sue the money unless they both signed due to her capability 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 actually contributed toward the property and therefore towards any equity in the property. It could be that as much as 50% of the equity in the house is classed as Bob’s.
If you are in a situation where you reside in a property owned by your partner and have approaching bankruptcy concerns give us a call for helpful advice. These case studies are by no means the entire story, there are a great deal of other scenarios that need to be considered and getting the right information is essential. By giving Bankruptcy Experts Hobart a call here on 1300 795 575 we can walk you through the potential pitfalls of what may happen if you apply for bankruptcy.
Names on House Titles
In Tasmania 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 change who is on the title of their property to attempt to protect that property before they declare bankruptcy. 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 wish to lose the house so to safeguard 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 protect their property in any way when Sue files for bankruptcy? In short, the answer is no; they cannot simply 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 Tasmania and it actually is just a waste of time.
We described in a previous case study, a couple who had been living 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 situation, even if your name is not on the title you might 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 just a matter of following the money, it is about equity asset value and who has paid what over what period of time. These sort of numbers and these sorts of calculations are more the philosophy behind how assets are determined when you declare bankruptcy rather than just names on titles or mortgages.
If you want to know more about titles of property and how bankruptcy will impact it, feel free to call us here at Bankruptcy Experts Hobart on 1300 795 575 and we will walk you through it. Do not presume that you have it all covered this is an extremely complex area of bankruptcy law and you can easily get it wrong.
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 home. Their home is valued at $700,000 and they presently have about $500,000 on their mortgage.
Bob is a builder in TAS and has really been struggling due to the fact that he injured 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 just not able to wait anymore, so to make certain that they get their payment for the account they have placed a caveat over Bob and Sue’s property.
Normally, as a mortgage holder you will be notified from your creditor that a caveat has been placed on your property and you might 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 outlet 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 outlet as a result of going bankrupt this does not automatically remove the caveat. So, what needs to take place is Bob and Sue need to go through the process of the bankruptcy and at the end of the three years the debt for the hardware outlet will be removed and they will no longer owe the hardware store the $150,000. They can then request the hardware outlet to get rid of 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, of course, a very simple explanation of how caveats operate in Tasmania, there is a lot more to it than we have briefly outlined. This example is not legal advice, it is merely just an example of how caveats work. Please feel free 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 many different situations and scenarios that can be considered when it comes to a caveat, if you would like to know more about them and how they can affect bankruptcy feel free to call us here at Bankruptcy Experts Hobart at any time on 1300 795 575.
Selling the House to a Family Member Prior to Bankruptcy, Is It Legal?
Bob and Sue have decided to declare bankruptcy and have decided that because they own their family house they do not want to lose it. However, Bob and Sue can no longer afford to make the payments and pay the other bills that come with home ownership. Instead of just selling their home out on the open market Bob’s uncle has decided he wants to purchase the property. The question is, in Tasmania can Bob and Sue legally sell their property to a member of the family before they declare bankruptcy? The answer is yes, in some cases. Where people go really wrong in this situation is selling their house to a family member, or somebody they know, at a greatly reduced rate. This triggers all sorts of problems not only for the people applying for bankruptcy but additionally for the person who purchases 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 scenario the bankruptcy trustee will instruct Uncle Joe to pay the bankruptcy estate the $100,000 discount that he thought he had saved purchasing Bob and Sue’s property. To protect themselves from the possibility of selling their home too cheaply before they declared bankruptcy, Bob and Sue should have had an independent valuation done on the property before it was sold. They should also have made certain that the transaction was done correctly using a solicitor or conveyancer to help them with the sale. If you are looking at selling your house to a family member prior to bankruptcy don’t attempt anything tricky, keep it a strictly commercial transaction the same as if you were selling to a complete stranger.
These are just the basics of selling a house to a family member prior to declaring bankruptcy. This process is generally a lot more complex, so if you would like to learn more feel free to call us here at Bankruptcy Experts Hobart on 1300 795 575.
House Has $30k Or More In Equity.
Bob and Sue have made the very tough decision to apply for bankruptcy, the biggest concern is their family house 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 Tasmania, 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.
Bob and Sue have made a decision they desperately want to keep their home even though it has some equity in it. When Bob and Sue originally applied 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 two 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 in between the house value and the house mortgage. To do this they would need to get the $30,000 from a friend, member of the family or someone else because as a bankrupt they do not have any money. Paying the trustee $30,000 at the beginning 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 3 year duration of their bankruptcy. At the end of their bankruptcy providing of course the house has actually not increased in value and their equity is still not more than that $30,000 the creditors will be satisfied and they can keep their house.
This payment arrangement does not automatically happen if you have some equity in your property and you apply for bankruptcy. Bankruptcy in Tasmania 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 want to keep your house in bankruptcy you can get sound professional advice from us here at Bankruptcy Experts Hobart. Call us on 1300 795 575 and we can walk you through your options.
House is Owned by One Partner.
There is a general assumption in Tasmania 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 declares bankruptcy. This is not the case and you need to be extremely careful about this assumption.
In this case study Bob and Sue have been married for 15 years but their home is entirely in Sue’s name. Bob’s name is not on the title or on the mortgage but they have both resided in the property for the whole 15 years they have been together. Bob is needing to file for bankruptcy.
In this particular situation it is likely that the trustee will view some of the equity in the property as Bob’s despite the fact that he’s not on the title or mortgage. The reason for this is simply because they have both contributed to household costs and have been living together financially for the last 15 years. Although not necessarily documented on paper Bob has contributed to the upkeep 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 in fact 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 expenses 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 despite the fact that 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 has to be worked out and is calculated at the time of bankruptcy.
If, for instance, Bob had just moved in with Sue six months ago and she had owned the house for several years prior to their relationship and him moving in, this would be dealt with very differently. The simple reason being that there is very little history of them both living in the same property. In this situation 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 don’t 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 Tasmania establishing equity in a property has to be proven rather than through just taking your word for it. Things like mortgage statements, bank statements, payslips and other documentation may be needed.
Here at Bankruptcy Experts Hobart we have the experience to walk you through establishing your property equity, call us on 1300 795 575 so we can help you through the process.
Surrendering the House to the Bank.
Bob and Sue have come to the hard 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 choose to surrender their house to the bank. The very first thing we at Bankruptcy Experts Hobart 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 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 remain 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 are not worried whether they go bankrupt or not. The bank will always get their money for the property because they have the loan secured against the property or another similar asset and can potentially sell it at any point to get the money. In Bob and Sue’s case their house is sold and it ends up 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 documentation, this does not have to happen prior to declaring bankruptcy or at the beginning of bankruptcy in fact it can happen any time throughout the 3 years. In some cases, properties may take a year or so 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 3 years of bankruptcy the problem is still the banks and they will deal with the asset or the house whenever they can.
In Tasmania when you surrender your house to the bank there is a false presumption with some mortgage holders that as they have paid for mortgage insurance this will somehow protect 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 just hand over to the mortgage insurance company and the bank will get its money for the house. Once 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 file for bankruptcy in TAS and are worried about what will happen if you walk away from your home, do not hesitate to call us here at Bankruptcy Experts Hobart on 1300 795 575 and we will take you through your options.
Can I Sell My House to a Family Member Before I Go Bankrupt?
This is a question that, on the surface of it, sounds terribly risky, however it is not if you understand what you are doing and things are done 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 want to hold on to the Hobart property as it has some sentimental value and some practical implications as Sue’s grandmother resides in a granny flat out the back and their disabled daughter 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 remain on there as tenants after bankruptcy? In Tasmania the short answer to this question is yes, if done in the correct way.
Our couple, Bob and Sue, decide to cover their mortgage commitment and at the same time look after Granny offering her a good deal, selling her the house for $650,000. They know full well that it is really worth $700,000 and that they are selling their house to Sue’s grandmother for less than market rate. In this scenario the sale could 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 received if the property was sold at a reasonable 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, before selling to Sue’s grandmother at that established amount.
So, as you can see in this situation the problem was not that they sold the house to a member of the family, the problem was that they sold it to a family member at less than market value.
In this situation another trap that Bob and Sue could 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 capacity to borrow any money. As Granny is not able to buy the property from them Bob and Sue decide to transfer the ownership or the title to Sue’s grandmother before they declare bankruptcy hoping that this will protect them from losing their house. This situation is considered the same as if Bob and Sue gifted the property to Granny, it does not work simply changing whose name is on the title in bankruptcy, it is about following the money. In bankruptcy just changing the ownership title on a house or property will do nothing to protect it from being sold as an asset.
If it appears like you might be heading towards bankruptcy and you have concerns about your house, give Bankruptcy Experts Hobart a call on 1300 795 575 for all the answers.