House Has $30k or More in Equity
Bob and Sue have made the very difficult decision to declare 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 New South Wales, what will happen to their home when they declare 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.
Surrendering the House to the Bank.
So, Bob and Sue choose to surrender their house to the bank. The very first thing we at Bankruptcy Advice Sydney 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 house. This means the bank does not have to pursue legal action to have them removed from the house.
A Question of Caveats
Bob is a builder in NSW and has really been struggling due to the fact that he injured his back. He owes $150,000 in unpaid accounts to a particular hardware outlet 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.
Why Would You Go Bankrupt If You Had Equity In Your House?
But I Have Mortgage Insurance?
Five years earlier when Bob and Sue were looking to buy a home in NSW 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. Bob and Sue were happy to pay the mortgage insurance because they didn’t have the required 20% deposit to eliminate paying mortgage insurance premiums and it meant that they could buy a house earlier.
I Have Heard My Property Can Be Tied Up for Eight Years or More When I Go Bankrupt?
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 decided to declare bankruptcy. They cannot afford to maintain the mortgage payments and so have decided to walk away from their family home. The question is, once bankrupt how long have Bob and Sue got before they will be required to vacate the property?