You may be worried about what will happen to your family home when you declare bankruptcy. A Bankrupt’s home is not a protected asset under the Bankruptcy Act, meaning that a bankrupt’s interest in any property vests with the Bankruptcy Trustee. This means that the Bankruptcy Trustee can take full control of your interest in the property. However, the family home may not always be sold as it depends on the individual’s circumstances.
For example, the property can be jointly owned (i.e. the bankrupt owns 50% and the non-bankrupt spouse owns the other 50% interest), where the Bankruptcy Trustee will now deal with the 50% interest owned by the bankrupt. It is commonplace for the Bankruptcy Trustee to sell the bankrupt’s interest to the non-bankrupt spouse or another family member as it avoids unnecessary stress selling the family home and potential selling costs.
Another scenario is if your family home was purchased using protected money (e.g. superannuation funds, insurance or workers compensation payments) then it cannot be sold by a trustee to pay off debts.
Debt Free Australia are passionate about helping Australians get out of debt and prepare for a better financial future. If you are considering bankruptcy and would like to know more about the impact it may have on your family home then please contact us on our 24/7, toll-free hotline on 1800 676 598.