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Bankruptcy And Your House – Essential Facts

It is possible for you to remain living in your house, provided all the boxes can be ticked.

  • Your lender has a mortgage over your house and, at all times, has the right to sell your house as mortgagee in possession if you default. You should ensure that your mortgage payments are kept up to date.
  • The Trustee views your payment of the mortgage payments as an occupation fee and requires you to properly maintain the property – pending the Trustee selling the interest of the bankrupt estate in the property.
  • For you to stay living in the house long term it will be necessary for a trusted family member or friend to buy out the interest of the bankrupt estate in the house.
  • Before a Trustee can deal with an associated third party in regard to a property, he will conduct investigations to confirm that the mortgage and transactions pertaining to the property are legitimate and have not been contrived to defeat creditors.
  • Once the Trustee has documented that transactions pertaining to the house are legitimate, he will issue a report to creditors to advise that he intends to deal with an associated party to realise the interest of the bankrupt estate in the property. The Trustee will allow creditors a period of time to object. If a creditor objects, the creditor is required to provide a legitimate reason that has substance.
  • When all of the boxes have been ticked by the Trustee, the Trustee will then be in a position to negotiate with the third party – for that person to buy out the interest of the bankrupt estate in the property.
  • It is important to note that the value of the property will be the value at the time agreement is entered into and not the value at the date of bankruptcy.
  • The Trustee will determine the value of the property by obtaining a valuation by an independent Registered Valuer.
  • The Trustee will be open to realising the equity in the property or selling the property to the associated third party. For both scenarios the Trustee requires a written contract to be in place.
  • To realise the equity in a property the Trustee will deduct the debt owing on the mortgage from the valuation amount provided by the Registered Valuer, to determine the sale amount.
  • To sell a property the Trustee will look to realise the property for the valuation amount advised by the Registered Valuer.
  • To give certainty and clarity the Trustee will only enter into an agreement with an associated third party by written agreement. This enables parties to freely talk to the Trustee regarding the property and be safe in the knowledge that nothing is binding between them and the Trustee until a written agreement (contract) is put into place and exchanged.

Further and more detailed information on options regarding house properties can be obtained from this website or by calling Alan Nicholls on 1300 676 998.


Alan Nicholls Bankruptcy Advice

Alan Nicholls specialises in assisting those in financial difficulty through the process of understanding & filing for bankruptcy. For more details see the contact information below: