What Happens To My House After Filing Bankruptcy?
The following article addresses the commonly asked what will happen to my house in bankruptcy question.
We all dream of home ownership. But what happens when the Canadian dream of owning your own home does not work out as well as expected?
It costs a lot of money to own a home. You have mortgage payments and property taxes. Your gas and electricity bill will be higher than when you lived in an apartment, because your house is bigger.
Of course everyone wants furniture for their bigger house, and that costs money. Unfortunately many Canadians buy a new home and then go to a furniture store that offers a “buy now, pay later deal”. It sounds great: I get my furniture today, and I don’t have to pay for it for a year. It’s great until next year comes, and now you’re faced with a huge bill for furniture that you can’t afford.
If when the furniture bills comes in you have also lost your job, or perhaps had your hours cut at work, you now have a problem.
For many people the only solution may be a personal bankruptcy.
What will happen to your house in case of bankruptcy?
While the laws are slightly different in each province, the basic concept is the same. You can’t keep a house in bankruptcy if you have a lot of equity in it at the time when you go bankrupt. (You can calculate your home’s equity by subtracting the mortgage and property taxes owing from the value of your house). Obviously it’s not fair to your creditors that you keep money while their debts are being discharged.
If your house has little or no equity, you can usually make an arrangement with the mortgage company to keep paying your mortgage, and keep your house after filing bankruptcy.
If your house has substantial equity, your trustee will either seize your house and sell it, or make arrangements with you to repay your equity (perhaps by you borrowing from friends or family, or getting a second mortgage to re-purchase the equity from the trustee).
The rules regarding houses and bankruptcy are somewhat complicated, so to find out how they will apply in your specific situation and for details on what will happen with your house after filing bankruptcy, we recommend you to contact a bankruptcy trustee.