Refinanced home cause a problem?

September 12th, 2005 by Questions

Over a year ago in June, my new husband and I refinanced my home (bought in my name long before I met him) to pay off a credit card debt of mine that had gone into collections and they were forcing me to come up with the money immediately.

When we approached the mortgage broker, she noted that my credit was terrible at that point, and I would be unable to get a new mortgage. But my then fiance had a great credit rating, and so she suggested we transfer the house into his name only, and use his credit rating to get the new mortgage. We were able to reduce our interest charge from 7.5 to 2.4 and get money back to pay off most of my debts!

I paid off the credit card debt and all of my smaller debts and made large payments on some larger debts.

However, I still have the larger debts outstanding and my business has been forced to close a few months ago. So I can no longer make payments, and my now husband is no position to pay them for me. All debts were created before I met him, and in my name only.

Anyhow, now I need to declare bankruptcy as I have no income, but I am afraid. I have been told that they will see our house transfer as fraudulent, and I am afraid I will get in so much trouble as a result! As a result of the refinancing last year, there is no equity in the house at this time. I did not know I would have to declare bankruptcy a year later, but do understand how they might not see it that way…

Questions

One Response to “Refinanced home cause a problem?”



, Barton Goth, GCO Inc. Bankruptcy Trustees said:

The answer to your question is heavily dependent on a) which province you live in, and b) how much equity is in the home. Each province has an allowable portion of equity that is protected in the event of a bankruptcy, take Alberta for instance, in Alberta you are allowed to keep $40,000 of equity in your home. Therefore, in Alberta if you transfer your home to someone else prior to filing bankruptcy, there is no concern if you have less than $40,000 of equity. The creditors would not take exception to this transfer, as it was not preserving any equity for yourself or others (i.e. even if the house was in both names they would not have received any money if a bankruptcy were filed). Now if you had in excess of this $40,000 they would be concerned. If there is a concern (as your equity is greater than the exemption allowed in your province) there are 2 solutions. First you could transfer the title back into your name prior to filing bankruptcy and explain the situation to your trustee. The other option is to file a proposal to your creditors that provides them with the same amount of money they would have been entitled to receive had the property been held in joint names. Either way it will be important for you to discuss this with a trustee prior to making any decisions or taking any action as he will be able to help you proceed in a manner that will reduce any future concerns.

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