Can You Keep Your House in Bankruptcy in Canada?
Will I Lose My House When I
File For Bankruptcy in Canada?
Owning a home is a dream for many Canadians. However, financial difficulties can sometimes make it challenging to keep up with mortgage payments and other debts. In such situations, filing for bankruptcy may seem like a viable option. But what happens to your house if you declare bankruptcy in Canada? In this article, we will explore the ins and outs of keeping your house during the bankruptcy process.
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Assessing Equity in Your Home
When considering whether you can keep your house in bankruptcy, the amount of equity you have in your home plays a crucial role. Equity is determined by subtracting the amount you owe on your mortgage and any unpaid property taxes from the current market value of your house. This calculation helps determine the value that could be used to repay your creditors.
Can You Keep Your House with Minimal Equity?
If you have a small amount of equity in your home and your outstanding debts significantly outweigh the equity, there is a possibility of retaining ownership of your house. However, this depends on your ability to continue making mortgage payments. In this scenario, you may be required to pay the equity amount, minus any provincial exemptions, to a Licensed Insolvency Trustee (LIT) during the bankruptcy process.
Understanding Provincial Exemptions
Each province in Canada has its own list of exemptions that protect certain assets during bankruptcy. These exemptions allow individuals to retain a portion of their equity, ensuring they can maintain their homes to some extent. It’s crucial to consult with an LIT to understand the specific exemptions applicable to your situation in your province.
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Surrendering Your Home in Bankruptcy
In cases where you have a significant amount of equity in your home and are unable to afford the payment of non-exempt equity to the LIT, you may have to surrender your house. Surrendering your home means that it will be sold, and the proceeds will be distributed among your creditors to repay your debts.
Alternatives to Bankruptcy
While bankruptcy may be one option for debt relief, there are alternatives that can help you keep your house. One such alternative is a consumer proposal, which allows you to negotiate a repayment plan with your creditors to reduce the amount of unsecured debt you owe. It’s essential to discuss all available options with an LIT to determine the most suitable path for your financial situation.
Paying Your Mortgage During Bankruptcy
Filing for bankruptcy can eliminate or reduce your unsecured debts, making it easier to meet your financial obligations, including mortgage payments, property taxes, and utilities. During the bankruptcy process, you will attend credit counselling sessions where strategies for budgeting, debt management, and credit rebuilding will be discussed.
Seeking Professional Guidance
Navigating the complexities of bankruptcy and its impact on your house can be overwhelming. It is highly recommended to seek the guidance of a Licensed Insolvency Trustee. They have the expertise and knowledge to assess your financial situation, explain the implications of bankruptcy, and explore alternative solutions that may better suit your needs.
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Conclusion
While filing for bankruptcy in Canada may raise concerns about losing your house, the outcome depends on various factors such as the amount of equity in your home and the exemptions applicable in your province. By seeking professional advice and exploring alternatives like consumer proposals, you can make informed decisions to protect your assets and work towards a fresh financial start. Remember, each situation is unique, so it’s crucial to consult with a Licensed Insolvency Trustee to understand the best course of action for your specific circumstances.
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