Bankruptcy And The Family Home

Can I Keep My House
With No Equity?

Bob and Sue live in Qld and own their family home. Times have actually not been very good and they have chosen to apply for bankruptcy. They are terribly stressed over what will happen to their home. In this particular case study, we will take a look at what actually occurs in Queensland when you declare bankruptcy with a house 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 home now that they are going to go bankrupt?

House Has $30k or more in equity.

House Has $30k or More in Equity

Bob and Sue have made the really difficult 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 Queensland, 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 Has $30k or more in equity.

House Is Owned By
One Partner
?

There is a general presumption in Queensland 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 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 lived 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 tough decision to apply 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 Cairns 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.

surrendering the house to bank

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 most likely need to apply for bankruptcy but they own their family home. Bob and Sue are considering possibly selling the house prior to going bankrupt so that they do not lose the money from the sale of the property when they declare bankruptcy. The question we often get asked here at Bankruptcy Cairns is whether that is legal to do or are you doing something wrong.
A Question of Caveats

A Question of Caveats

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 currently have about $500,000 on their mortgage.

Bob is a builder in Qld and has really been having a hard time since he injured his back. He owes $150,000 in overdue accounts to a particular hardware store who have been really patient with Bob and understand his situation.

A Question of Caveats

Names on House Titles

In Qld 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 declare bankruptcy 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.
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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 thinking about bankruptcy and believes that he has no choice. He has serious concerns because his wife Sue owns the Cairns house that they live in and he is really worried 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 home mortgage.
When The House is in Your Partners Name, and They Don’t Need to go Bankrupt.

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 Cairns 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 really worried about losing his home when he files for bankruptcy, especially considering his partner Sue has actually been contributing financially towards mortgage payments for the last 5 years.

Why would you go bankrupt if you had equity in your house?

Why Would You Go Bankrupt If You Had Equity In Your House?

Bob and Sue have owned their Cairns house for years and have actually 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.
Why would you go bankrupt if you had equity in your 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 awfully 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 wish to hold on to the Cairns property as it has some sentimental value and some practical implications as Sue’s grandmother lives in a granny flat out the back and their disabled daughter requires the wheelchair access set up at the property.

But I Have Mortgage Insurance?

Five years earlier when Bob and Sue were aiming to buy a home in Qld 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 sooner.
But I Have Mortgage Insurance?

What If My Partner Wants To Buy My Share of the Property When I go Bankrupt?

Bob needs to declare bankruptcy however his partner Sue does not. They own a Cairns house together worth $700,000 and they have $100,000 equity in the house. Bob has realised that he can no longer afford to contribute to paying the mortgage on the property and is needing to declare bankruptcy. 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 once Bob declares bankruptcy that Sue can potentially buy out Bob’s interest in the property and retain their home. The answer is yes, maybe.

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?

Let us examine 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 wanted to try and keep their Cairns 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.
I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt

What If I Can Not Keep Paying the Mortgage Halfway Through My Bankruptcy ?

Bob and Sue went bankrupt eighteen months ago with no equity in their family home. They had decided they would try to keep the property so that at the end of the 3 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 capacity to continue to pay the mortgage. In this case it is fairly simple, 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 couple of 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, once bankrupt how long have Bob and Sue got before they will be required to vacate the property?
Bankruptcy Experts - Case Study -  What if i decide to hand the house back to the bank when i go bankrupt, how long do i have before i need to leave?

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 lot of people facing bankruptcy, are thinking surely we will not lose our family home, we need to live somewhere.

Sadly in lots of bankruptcy situations, as we have seen in these case studies, keeping your home is not an easy process. Sometimes it is simply not possible. Keeping your home in bankruptcy is all about the money, it is not about the nostalgic value, emotional value or your own specific 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 works in Queensland, no matter what your circumstances, if you have a home that you have equity in then it is under threat when you declare bankruptcy.

What If My House Was Purchased With an Inheritance?

Bob and Sue have been residing in their Cairns family home for five years and about two years ago Sue inherited a large sum 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 Qld the answer to that question is no, it is not safe at all. Inheritances and inheritance money received prior to bankruptcy are still considered as assets and as such are still exposed to the bankruptcy trustee.

What if i purchase my house

I Bought a House With Compensation Money, Is That Money Safe If I Go Bankrupt?

Bob and Sue have been residing in their family home for several years. About five years ago Bob had a major 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?
I bought a house with Compensation Money is it safe If I go bankrupt?

Will I Still Have to Pay Rates, Insurance and Body Corp If I Go Bankrupt?

Bob and Sue are filing for bankruptcy and have come to the heart-breaking decision to leave their Cairns 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 house. The bankruptcy trustee will usually 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 unpaid household debts will not impact them handing the house back to the bank.