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Home Owners and Personal Debt – To Sell or Not To Sell?

Posted on 3 May 2018

Home ownership is a great way to build wealth. However, owning a home can also be very expensive and lead to personal debt trouble. Footing the bill for unanticipated costs such as a new water tank, roof, or furnace – even a significant increase in hydro rates, or a plumbing problem can throw a good budget off its game.

Home owners must balance the challenges of paying a mortgage and all other associated housing costs. While keeping their personal debt low, they must survive the ebb and flow of expenses associated with owning a home. If they accumulate (and are unable to repay) personal debt they may place themselves in danger of losing their property.

How Can I Avoid Power of Sale?

To avoid power of sale proceedings, first you must be up to date on your mortgage and/or secured loan payments. If you have fallen behind in mortgage payments, you are not alone. Approximately 0.24%, of all Canadian mortgages are currently in arrears.

Falling behind in your mortgage payments is a sign that you may be in financial trouble and it may be time to come up with a plan to address the problem. Generally, homeowners carrying personal debt fall into two categories; those who can comfortably meet payment obligations for loans registered against their property and those who cannot. Regardless, the best course of action is to get help at the earliest signs of trouble. Protecting your home from power of sale proceedings can become challenging if you wait or do nothing.

Home Equity and Bankruptcy

Bankruptcy may not be the right solution for your debt problem – if you have significant equity in your home. In a bankruptcy, your Licensed Insolvency Trustee will review any outstanding debt that is secured to your property as well as the estimated current market value of your home. A net equity calculation will be made to determine how much money a hypothetical sale of your home would bring. The cost of bankruptcy will be directly linked to how much equity is in your home. The greater your equity the greater the cost of bankruptcy will be.

You should not file bankruptcy if the amount of net equity in your property adds up to more than the credit card or other debts that you have. You will want to consider other options such as:

Refinancing

Selling

Consumer Proposal

Refinancing

Refinancing can be tricky if you have not been paying your other debts. Your credit score will matter, as will your current employment situation. It may be difficult to borrow from a traditional lender if you are self-employed or a recent job loss has contributed to your financial trouble,

Selling

Selling is always an option (though, not ideal) if nothing else will work. It is preferable for an owner to voluntarily sell their home if there is equity. Power of sale proceedings are quick and creditors accept the best offer without haste, meaning they do not maximize the sale, find the right buyer and the right offer – like you would.

Consumer Proposal

A consumer proposal can help you to avoid power of sale proceedings. You can repay your unsecured personal debt while keeping your home safe. Giving you 5 years to make payments into your proposal, representing your home equity at the present date.

The spring market is a tempting time to sell your home. Explore all of your options before you post your listing. We can recommend solutions that will protect your home and free you from debt. Call Spergel 310-4321 to book a free consultation.

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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Your Information

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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Calculate Your Debt Repayment Options

How can you compare your debt repayment options if you don’t know how much they will cost you? Your solution will become much clearer when you are able to compare costs.

Debt Calculator

Ready to Be Debt-Free?

If you’re ready to be debt free, it’s time to meet with one of our knowledgeable Licensed Insolvency Trustees at your convenience and get started

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