Case study: Ramesh

Jointly owning a house and becoming bankrupt

Ramesh is a 67-year-old retired golfer. Ramesh and his partner Alex jointly own their house in Victor Harbor, South Australia, and are paying off a home loan.

In addition to his share of the home loan, Ramesh owes $90,000 of personal debt to several creditors.

Ramesh felt overwhelmed by his debts, and spoke to a financial counsellor about his options. Ramesh decided to apply for bankruptcy. His trustee is the Official Trustee (AFSA).

When Ramesh became bankrupt, AFSA automatically became the owner of his share of the house.

From then on, AFSA co-owned the property with Alex.

AFSA contacted Alex to explain some of the options for dealing with the house:

a) Alex could buy AFSA’s share

b) AFSA could sell its share to someone who Ramesh or Alex knows (e.g. a relative)

c) Alex and AFSA could agree to sell the house on the open market.

Alex agreed with AFSA to sell the house on the open market. The house sold for $400,000.

From the sale money, the bank was paid the loan balance of $360,000. Real estate agent fees were $12,000 and this left a balance of $28,000. Alex received half – $14,000. AFSA received the other $14,000, which was used to pay the fees and costs for administering the bankruptcy, and some of the debts Ramesh owed.

*These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice if necessary, before taking any action.