Proposal for Secured Debt?
Currently I am stuck with home I cannot afford, and on the brink of foreclosure. Since the payment is a lump sum each month I never have enough to make the payment. However, I am able pay off all other bills, credit cards, car payments etc since they are much smaller amounts. Selling my home would result in 100k or more in shortfall. Am I still eligible to file a proposal to avoid bankruptcy even if my mortgage is my only debt? what will happen to my mortgage debt?
Posted from: Alberta
You are correct that consumer proposals are not designed to assist with secured debt.
However, with your mortgage, it is only considered to be a secured loan if you retain the property. If you allow it to go into foreclosure, the bank will be taking possession of the property, selling the house and applying the proceeds to the outstanding balance of the mortgage. Clearly there will be a shortfall, now this shortfall is considered to be an unsecured debt.
So you then can file a consumer proposal and encompass all the remaining debt that relates to the house.
However, you legally must list all other debts (i.e. the credit cards you mentioned), but as the mortgage makes up the most of the debt, whoever is holding that mortgage will have more weight in the voting process that is required in the proposal.
At this point I think it is best for you to contact a local trustee and sit down to discuss specifically what needs to happen next.