Increased equity in your home during bankruptcy.
June 14th, 2007 by Questions
I understand that a individual can have up to $40,000 of equity in their residence in Alberta. What happens when a individual has declared bankruptcy, especially in a hot real estate market , and the equity increases substantially over the nine months of bankruptcy.Example,Before a person declares bankruptcy, the value is $250,000, a mortgage of $220,000 ,but while in bankruptcy (nine moths later) your home increases in value to $350,000. Will a person be penalized after nine months before they are discharged?
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June 15, 2007 at 9:38 am, Barton Goth GCO Bankruptcy Trustees said:
This is a difficult question to answer as there is a great deal of uncertainty in Alberta as a result of conflicting case law.
While it currently appears that the court system is dealing with this on a case by case basis, the most common approach seems to be to value the house the date it is dealt with by the bankrupt and their trustee. To deal with the property an appraisal must be obtained and a calculation of equirty must be done according to this appraisal.
Therefore as a result of the rapidly changing real estate values it is best for you to make these arrangements early as opposed to later.