August 21st, 2013 by Questions
My car was just repo since I was behind 3 payments, if I claim bankrupsy what will happen? Also will I lose my house in bankrupsy if I am behind on taxes?
Posted from: Ontario
August 21, 2013 at 11:45 am, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:
You have asked a number of different questions. Let us first deal with the car. When a vehicle is repossessed it is seized by the lender, sold and the proceeds are applied against the loan. Normally these sale proceeds are not sufficient to pay the loan and in most cases the amount of the loan that is not covered (“the shortfall”) is something you are responsible for. However, this is where the bankruptcy comes in as it will clear you from this shortfall.
The next question is about a house and how it is treated in a bankruptcy. The answer to this is different in each province, but in Ontario it all comes down to the amount of equity. To determine the equity you take the market value of your house, subtract off the value of the mortgage (or other financing that you might have) and the property taxes you are behind on. If the result is a positive number, meaning you have equity, then the amount of equity has to be paid in as part of your bankruptcy.
It is a bit different in other provinces as they have provincial exemptions that allow a portion of the equity to be considered exempt and thereby doesn’t need to be paid in. But in Ontario there is no exemption for a principle residence so any equity must be realized on by the trustee for the general benefit of creditors.
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