Home Ownership During a Bankruptcy or Consumer Proposal

How a Bankruptcy or Consumer Proposal Impacts Home Ownership

Contemplating bankruptcy or considering a consumer proposal can be overwhelming, especially when your home is involved. An ever-present question during this process is, “What will happen to my house?” The scenarios vary, and understanding each possibility is crucial.

2. Bankruptcy or Consumer Proposal: What’s the Difference?

Before diving into the specifics of home ownership during bankruptcy or a consumer proposal, it’s important to understand the distinction between the two.

2.1 Bankruptcy

Declaring bankruptcy is a legal process where a debtor who cannot pay their bills gets a fresh financial start. It’s a measure of last resort and has serious implications, including an impact on your credit rating.

2.2 Consumer Proposal

A consumer proposal, on the other hand, is a legally binding agreement between you and your creditors to repay part of your debts over time. It’s a less drastic step than bankruptcy and can give you more control over your assets.

3. Mortgage Implications

Whether it’s bankruptcy or a consumer proposal, your mortgage may be affected. If you’re lagging behind on your payments, your mortgage holder could take steps to reclaim your home.

4. Bankruptcy and Home Ownership

When you declare bankruptcy, any equity in your house is considered an asset. This means to keep your home, you have to pay the amount of that equity to your trustee, in addition to any surplus income payments required.

4.1 Determining Home Equity

Your trustee will need a recent appraisal and an updated mortgage statement to ascertain the amount of your equity. If the equity or ownership costs (mortgage, taxes, utilities) are too high, it might be more beneficial to relinquish the house and start over.

5. Consumer Proposal and Home Ownership

In a consumer proposal, secured debts, such as mortgages and car loans, are not included. As long as you continue to make your mortgage payments, you can keep your home. However, your home equity will factor into what you offer your creditors.

5.1 Reevaluating Home Ownership

If the costs of home ownership are too high, you might need to reassess your situation. It may be more practical to release the home and utilise the funds to pay off your debts.

6. Making the Right Decision

Determining the best course of action during these difficult times can be daunting. You’ll need to consider several factors, such as your income, the amount of debt, and your personal circumstances.

6.1 Professional Consultation

To make an informed decision, consider scheduling a free, no-obligation consultation with a licensed insolvency trustee. They can provide valuable advice tailored to your specific situation.

7. Conclusion

Understanding home ownership during a bankruptcy or a consumer proposal is no small task. It involves navigating complex legal processes and making difficult decisions. By arming yourself with knowledge and seeking professional advice, you can make the best choice for your future.

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