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Can I Declare Bankruptcy and Keep My House?

Posted on 20 April 2020

The most common concern people have when looking into filing for bankruptcy is they do not want to lose their house. Many people ask: ‘can I declare bankruptcy and keep my house?’ It is then generally shocking to them when we tell them that filing for bankruptcy will not force you to lose your house. In fact, this is one of the most common bankruptcy myths. Here is what you need to consider with regards to your house when filing for bankruptcy:

Am I able to pay my mortgage?

If your mortgage payments are current, the secured lender holding the mortgage to your property cannot foreclose on your home. If you can keep your payments current, you can keep your home going forward. If, however, you are struggling with debt, it may not be so simple to make your mortgage payments. A key indicator may be if you are struggling with credit card debt or bills, which can easily impact your mortgage too. If you owe more money to creditors than the value of what you own, you are insolvent. This means you can explore debt relief options like a consumer proposal or bankruptcy, even if you have equity in your home. Bankruptcy can actually help you to keep your house by clearing other debts that may make it difficult to make your mortgage payments.

How can I declare bankruptcy and keep my house?

According to Ontario law, provided your home equity is no more than $10,000, you simply need to make your mortgage payments to retain your home. Bankruptcy clears unsecured debt, whereas a mortgage is a secured debt, and therefore separate. Your mortgage lender cannot foreclose on your home because you have declared bankruptcy. Learn more about Ontario bankruptcy exemptions, and your assets and bankruptcy. If your equity is more than $10,000, you will have to pay your Licensed Insolvency Trustee the equivalent of the equity value. Sometimes, this can mean high monthly repayments. At Spergel, our experienced trustees can help walk you through each step of the process and advise you on keeping your home.

Can I keep my house by filing a consumer proposal?

If your house has a lot of equity, it may be difficult to keep up the additional monthly repayments required by a bankruptcy. A consumer proposal can therefore be a great option, as it can lower your monthly payments over a longer period of time. This is typically over five years. Your mortgage lender is likely to accept a consumer proposal as they will receive more than they would in a bankruptcy. It is also a good deal for you, because you have longer to pay it back and you can keep your house.

Should I sell my home?

Selling your home is a last resort when it comes to your debt relief options. For many, bankruptcy will clear unsecured debt meaning that your payments are low enough to make your mortgage much easier to pay back. In other instances, a consumer proposal can spread out the payments to make your mortgage much more affordable. If, however, you are still struggling to make your mortgage payments on time, you can sell your house during the bankruptcy process. The equity from your property will be used by your Licensed Insolvency Trustee to go towards repayment for your creditors.

Wondering ‘can I declare bankruptcy and keep my house?’ If you are a homeowner struggling with debt, you can take comfort in knowing that keeping your house is very realistic and you have other debt relief options.  The best way to know what solution is best for you and what it may cost is by contacting an experienced Spergel trustee by calling 310-4321, visiting our nearest location for a free consultation, or completing our free assessment form online.

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Helpful starting information:

What to Bring to an Appointment

To get the debt help that you need, please bring a list of who you owe and how much to each, a list of everything you own and your monthly household budget. Don’t have everything right away? Don’t worry – We will guide you through each step.

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We’ll walk you through our application process. But, if you want to prepare for your debt free assessment consultation in advance, download our information form and fill in what you can.

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