Bankruptcy in Australia - Will I lose my home if I go bankrupt?

Bankruptcy in Australia is a difficult to understand process, but I know from meeting with thousands facing the likelihood of bankruptcy over the years, that absolutely nothing concerns people more than the notion of losing the family home or apartment. Almost everybody is sentimentally connected to their home - it's where the kids have grown up, it's where you take pleasure in life on a day to day basis.

Will you lose your house if you go bankrupt? The answer is a resounding maybe. (not very useful, I know) People typically presume it's an inevitable consequence and a part of Bankruptcy, and because of this push themselves to the brink of insanity to not lose the family home. But when it comes to the whole process of Bankruptcy, a key strength of Debt Agreements and Personal Insolvency Agreements is you can keep your house. The reason is simple: you've accepted to pay back the debt you are in.

So how is it possible to keep my Australia house, you ask? It's easier if I explain the basic theory behind the Bankruptcy process as administered by the trustee, then you'll have a more clear picture.

The purpose of the bankruptcy trustee is to firstly comply with the regulation of the bankruptcy act 1966 (it's a very boring read about 600 pages if you are curious).

Within that regulatory framework, the trustee is to help recover monies owed to your creditors, that is executed in a bunch of various ways but it mainly comes down to income and assets. The trustees role is to collect payments over and above your income threshold. The other role is to sell any assets that can contribute to paying back your debts.

What this sounds like is that yes the trustee will sell your house right? Not normally. The only reason the trustee will sell any asset including your house is to get money to repay your debts. If there is no equity in your house then it's pointless to sell your home. This is happening much more since the GFC as house prices in many regions have been heading south so what you paid 4 years ago may not always reflect the price today.

A quick tip here if you have a house in Australia and are looking at Bankruptcy: get a professional to help you through this process, there are a lot of variables in these scenarios that have to be considered.

You might wonder, why would the bank want bankrupt customers? wouldn't they hope to sell your house and not take the risk? The bank that has generously lent you the money for your house is earning good money every month in interest out of you, month in month out, so long as you keep up to date with your fees then the bank desires you in there at all costs. Essentially however it's not the bank's call if the trustee establishes that there is lots of equity in your house the trustee will force you and the bank to sell the house.

When you file for bankruptcy you are asked to list the value of your house and the amount of money you owe on the house. A tip if you are attempting to work out the value of your house: use a registered valuer as this will give you peace of mind, don't use your neighbours' gut feel recommendations or a real estate agents advice to reach this figure. When you get a valuer out to your home, ensure you tell the valuer to value the property for a quick sale, make certain you mow the lawn and don't leave the kitchen in a mess also.

Valuers used to provide two valuations: one for a quick sale and one for a well marketed non time sensitive sale. Nowadays that's not the case, but if you meet them and tell them you need to sell your home in the next 30 days you may sway the result. The idea is that you want a sound sell now figure.

There are two reasons this valuation process is critical to you: one you will have peace of mind ascertaining the market value of your house, and afterwards you can easily create your equity position. Secondly, your home may be really worth much more than you thought. Get some tips before carrying this out. The amount of times I've met clients that have sold their family home of 20 years just to figure out I could of helped them keep it; unfortunately this happens all too often

When it comes to Bankruptcy and houses, another primary consideration is ownership, in many cases houses are bought in joint names. To puts it simply a couple may be a house 50/50 using both incomes to make the payments. If one party declares bankruptcy and the other party does not, the equity is only factored on the 50 % of the property.

When it relates to Bankruptcy, this is just one of potentially hundreds of scenarios that are possible when it comes to the family home. Bear in mind the non-bankrupt party can buy the bankrupt's portion of the home in bankruptcy also. I should repeat this but get some guidance on this area of Bankruptcy because it is very tricky and every case is different.

If you want to learn more about what to do, where to turn and what questions to ask about Bankruptcy, then feel free to call Fresh Start Solutions Australia on 1300 818 575, or visit our website: www.freshstartsolutions.com.au