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Can they take your house if you file bankruptcy?

I unfortunately am looking at bankruptcy as an option. I was told if you remortgage your house at any time they can take your house away. My question is can they take your house if you file bankruptcy? And what if you could still make the payments on the house only?

Posted from: Alberta

One Response to “Can they take your house if you file bankruptcy?”

Barton Goth – Goth & Company Inc. -Trustee in Bankruptcy said...

This is a difficult question to answer without context, but overall this is what can happen with a house.

First, anytime you have a secured creditor (car loan, mortgage, secured line of credit), this debt largely works outside of the bankruptcy process. Meaning if you have pledged the property as collateral, you must continue to make your payments or the property will be foreclosed. This is irrespective of whether or not a bankruptcy has been filed.

In terms of the bankruptcy, when someone files a bankruptcy there is certain property that can be protected, we refer to this as exempt property. In the province of Alberta you are permitted to have up to $40,000 equity in a principle residence. So if you take the value of your house, subtract any mortgages or secured lines of credit from the value, the difference would represent your equity. If this value is less than the $40,000 mark you have no issue, however, if you have greater than the $40,000 mark then you will have to determine what is best. At that point the standard options are a) you can repurchase the non-exempt equity back from the trustee; or b) the house needs to be sold.

As this can be a very sensitive issue, you are best to contact a local trustee and discuss the ins and outs of this process directly.