Can I keep my home in bankruptcy?
When people are in debt, they don’t want to think about what they may have to give up in order to get out of debt. People like their possessions. They are their possessions for a reason! People work hard for those possessions, especially their homes. Your home is where your kids grew up (or they’re maybe still growing up there), and owning it fills people with tremendous pride.
So when you hit hard times, whether due to the loss of a job or bad financial decisions, you’re suddenly faced with some tough choices about many things, including your home. Do you sit tight and hope things turn around, all the while accumulating more debt, or do you take some definite action that starts you on the road to recovery right now?
The bottom-line is that if you do declare bankruptcy, there’s a good chance you will be able to keep your home. Ontario provides an exemption for some equity in your home in the case of a bankruptcy. Whether you can keep your house or not will be carefully calculated by your trustee, taking into account the exemption, joint tenancy, ownership, equity, and cost of sale. If it is determined that you can choose to keep your home, then you need to make sure that it really is the best option for you and your family.
Take a look at the following factors that might ultimately affect your ability or desire to retain ownership of your home. While reviewing these areas won’t provide a definitive answer regarding tackling your debt problem, it will at least give you some sense as to whether you can afford to keep your home.
Can You Afford Your Mortgage?
An important consideration is your mortgage, which is likely your biggest single monthly expenditure. If you file for bankruptcy, your debt load will be considerably reduced. Could you afford the mortgage if it was your only debt? Another key issue to take into account is whether you have already fallen behind on your mortgage payment, and how far behind you are. Can you catch up? If this is a possibility, then is your mortgage lender prepared to work with you? Some will allow two, possibly even three payments to lapse before taking action such as foreclosure. Are your property taxes up to date? If not, they would need to be brought up to date as well.
Can You Afford to Run Your Home?
Are you able to afford the monthly costs of homeownership, such as utilities? If you’ve fallen behind in any of these areas you may have liens placed against your home, something that will raise a red flag for mortgage lenders, and possibly even lead to a forced sale, even if you’re not behind on mortgage payments.
Do you Have Equity in Your Home?
Finally, make sure you know how much equity you’ve built up in your home, if any. It’s not difficult to figure out: it’s the balance between the home’s value and what you owe your mortgage lender. If the amount of equity is high, your trustee may suggest that you consider an alternative to bankruptcy, such as a consumer proposal. If you have a small amount of equity in your home, your chances of being able to keep it after bankruptcy are better.
It’s important to realize that whether or not you decide to keep your home after bankruptcy will affect your future financial stability. The home may give you an excellent opportunity to build up your credit again as you continue the mortgage payments. On the other hand, if you can’t really afford the mortgage and upkeep of the home, it will take you back down the same path of debt and, ultimately, insolvency.
Everyone’s situation is unique, and requires careful consideration with expert advice. If you have questions or concerns, contact us today for a free, no-obligation consultation.