It's never too late to get help - saving the family home

Updated: Jun 7

protecting family home

Getting specialist insolvency advice prior to entering into bankruptcy can have an enormous impact on the process and outcomes. This month’s case study depicts a situation where our client entered into bankruptcy without specialist advice and how de Jonge Read assisted in dealing with issues that were subsequently faced by our client. BACKGROUND Earlier this year we were approached by a client who previously operated a retail outlet as a sole trader. Due to insurmountable debts, the business had ceased trading. Following advice from her solicitor, the client entered into personal bankruptcy. The client was referred to our firm by her husband’s accountant after receiving a letter from the trustee requesting payment of $45,000 to acquire his wife’s bankrupt estate’s equity in the jointly owned family home. The husband was faced with the prospect of losing the house as he was not able to pay the $45,000. The following facts were uncovered from our review:

  • Wife and husband jointly owned the family home;

  • Family home was valued at some $290,000, according to a valuation obtained by the trustee;

  • The following loan balances were identified as mortgaged against the property :

  • Home Loan $150K

Business Loan $25K

  • Business Overdraft $25K

  • This left a net equity position of $90,000, of which the trustee asserted a claim to 50%, that is $45,000;

  • Despite guaranteeing the business loans, the client’s husband had no involvement with the business as the business was operated solely by the wife;

  • The husband was not in a position to refinance

STRATEGY de Jonge Read developed a strategy that achieved the following outcomes:

  • Through conducting detailed investigations and sourcing the appropriate evidence, we identified scope to apply an equitable principle known as the Equity of Exoneration. The Equity of Exoneration would allow the husband to argue a greater equitable interest in the property than his 50% legal interest;

  • Equity of Exoneration is a principle that allows for equity apportionment in real property, such as the family home, to be varied where the property is used to secure finance for the benefit of some but not all owners. The ability to apply this principle is not always available, however, and must be properly supported by evidence;

  • The evidence was carefully prepared and presented to the trustee in bankruptcy who eventually accepted that the Equity of Exoneration should apply with respect to $50,000 in business loans borrowed by our client with no benefit conferred on her husband;

  • An independent valuation was also obtained to verify the value of the property.


An agreement was then negotiated with the trustee having regard to the Equity of Exoneration and our client’s independent valuation. This resulted in a negotiated settlement for some $20,000 with the trustee that the husband was able to afford and that was significantly less than the trustee’s original claim. de Jonge Read made arrangements on behalf of the husband to pay the trustee the negotiated settlement amount over a short period of time. Through the above course of action, the husband was able to retain the family home and substantially improve the overall outcome. TAKE HOME It’s never too late to get good advice and, as shown in this case study, even though the client did not enter into bankruptcy with the assistance of de Jonge Read, our assistance at the later stage assisted in obtaining a far superior result for the husband and wife.

#Bankruptcy #familyhome #Insolvency #preinsolvency #Strategy

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