Can I “redo” my mortgage if I file for personal bankruptcy?

Redefining Your Mortgage Post Personal Bankruptcy: A Comprehensive Guide

Personal bankruptcy is a legal process that provides relief to individuals struggling with an overwhelming amount of debt. By declaring bankruptcy, you’re essentially stating that you’re financially incapable of paying off your debts as they’re due.

The Implication of Bankruptcy on Your Mortgage

Filing for bankruptcy does not mean you’ll lose everything. Certain assets, including your home, may be exempt depending on the equity and the exemption limit in your province.

Redefining ‘Redoing’ a Mortgage

The term ‘redoing’ a mortgage can be interpreted in two ways. It could mean renewing your existing mortgage contract with your current lender, or it could imply refinancing your mortgage with a different lender.

The Impact of a R9 Credit Rating

Filing for personal bankruptcy results in a R9 credit rating – the worst possible rating. As a first-time bankrupt, this will remain in your credit history for six years post-discharge.

Renewal of Existing Mortgage After Bankruptcy

If you’re looking to renew your existing mortgage contract post-bankruptcy, you’ll be relieved to know that most mortgages renew automatically without a new credit application. Therefore, your R9 credit rating won’t affect your renewal.

Refinancing Your Mortgage Post Bankruptcy

On the other hand, if you’re planning to refinance your mortgage with a different lender, your R9 credit rating will most likely hinder your chances. Refinancing requires a new credit application, and lenders will base their decision on your credit rating at the time of application.

Strategies for Homeowners and Bankruptcies

If you’re a homeowner considering filing for bankruptcy, your best course of action would be to accept the automatic renewal offered by your current lender.

The Role of Your Existing Mortgage Lender

Your existing mortgage lender’s decision to renew is not based on your credit rating at the time of renewal. Therefore, even if you file for bankruptcy, this should not impact your mortgage renewal.

Seeking Professional Help: Licensed Insolvency Trustees

Facing bankruptcy is a challenging ordeal, and it’s essential to seek professional help. Licensed Insolvency Trustees are federally regulated professionals who provide advice and services to individuals and businesses with debt problems.

Final Takeaway

In essence, while bankruptcy will affect your credit rating, it does not necessarily mean the end of your homeownership. Understanding your options and working with a Licensed Insolvency Trustee can help you navigate this challenging journey.

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