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If you have unsecured debt of under $10,000 and live in the Province of Ontario filing bankruptcy may not be the best option for you. We suggest you contact the Office of the Superintendent of Bankruptcy at 416-973-6441 to discuss your options, or you can visit their website here.

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in debt…but want to keep the house…

My fiancee and I bought a house together (which won`t be ready for a year) and my debt now is excessive, having to pay off a loan, credit cards and bills, I am saving $0 of my pay cheques and occasionally dip into my overdraft just to make ends meet.
I signed the papers with my fiancee for the house and am worried that if I declare bankrupcy that we won`t be able to get the house after. I know that if I declare bankrupcy and my debts are `cleared` I will be able to help make payments on the house and pay off personal loans from family that are also on my tab. Will they not approve a mortgage now if I am bankrupt and my name is on the house?

Posted from: Ontario

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One Response to “in debt…but want to keep the house…”

Barton Goth – Goth & Company Inc. – Bankruptcy Trustees said...

You have touched on a number of important issues. The first of which deals with the debts that must be listed. All debts must be listed with a bankruptcy, this includes any money owing to family and friends. If you file for bankruptcy you legally are not in a position where you can continue to pay your family or friends.

The second thing tha becomes important is the impact on your credit. As you credit will clearly have negative remarks being approved for a mortgage may be difficult. However, the bigger issue is that of a down payment, if you had cash for a down payment, depending on how much and where it came from this may cause problems. The argument is that if you had this money why was it not used for repayment of debt. So will the presence of a bankruptcy make it more difficult to obtain a mortgage, maybe, but this really depends on what your credit rating and debt level sit at currently.

As you can see there are a number of complicated questions that arise, as such you would be best to sit down with a local trustee so they can review things in a little more detail and determine if these issues will be serious in your situation or not.

A third issue that comes out of this deals with any equity in the house. In Ontario you are not permitted t have any equity in the house, and if there is your portion must be realized on (i.e. you can sell the house and your 1/2 of the equity would come into the bankruptcy estate, you can take a second mortgage on the property up to the value of you 1/2 interest etc.).