Home Equity and bankruptcy

January 26th, 2007 by Questions

During my initial meeting with my trustees assistant, I had taken in my Property Assessment and my mortgage papers. I was told that I would likely need a letter of opinion from a real estate agent as to the market value of the home. My mortgage owing is 75000 and my assessment was 87000. Today I was called and told that after speaking with the trustee, he is willing to just use my Property Assessment and would not require a \”letter of opinion\”. Is this legal, I don\’t want any surprises. Also he said that there would have to be somewhat of a settlement. Since the house is in both names, but only one of us is filing bankruptcy, what would be an acceptable amount to pay into the estate. My debts are $36000 and we are in Ontario. Thanks.


One Response to “Home Equity and bankruptcy”

, A licensed trustee said:

I can see why this might make you uncomfortable. As a rule, we require all of our clients to provide a letter of market value or an appraisal when a house is involved. It’s as much for the client’s protection as it is ours.

I will give you an example. Let’s say, you use your property tax assessment of $87,000 and go ahead and file. A month from now one of your creditors calls your trustee and says, “houses in your neighbourhood are selling for $97,000+ these days”. Your trustee will have to explain to the creditor that, “we didn’t bother with an letter of value – I guess the client will just have to pay us more to keep their house.” I am certain you don’t want this to happen to you.

As far as how much to offer as a settlement: once you have a better idea of the value, calculate what would be left if you sold the house on the open market. Offer your trustee half of that number if the other person on title isn’t filing bankruptcy with you. This is a good place to start and most trustees will accept it.

Before you file bankruptcy make sure you work out how much you will have to pay – don’t leave it up in the air or you may be in for an unpleasant surprise later.

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