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I`m in default of my mortgage and was wondering if I have to file for bankruptcy if my lender forecloses on my house. If not, what kind of impact will a foreclosure have on my credit rating? I realize it will have an impact on my credit rating, but was wondering if it would be easier to rebuild my credit after a foreclosure than a bankruptcy. Thanks.

Posted from: Ontario

One Response to “Foreclosure”

A licensed trustee said...

Frankly, no one has ever asked this question before. It is like asking if is it better to die by the electric chair or by lethal injection…

To aswer your questions, you certainly are not required to file for bankruptcy if your mortgage company seizes and sells your home. Assuming your mortgage was CMHC insured, once the mortgage company sells you home they will send you a demand to pay for whatever money may still be owed.

After the mortgage company does that, they then file a claim with CMHC for an insurance payout. Once this happens the mortgage company will leave you alone, BUT now you’ll have CMHC trying to collect the amount of the payout…. the strange thing about CMHC is that I’ve seen it take them YEARS to get around to trying to recover their money. The will eventually, but no one can tell you when that may be…

In regards to rebuilding your credit after either a foreclosure or a bankruptcy – each of these events will appear on your record for approximately 6 years and will make borrowing very difficult for the first few anyway… after that it will depend on your income and how you handle your finances after the event.