The home is often the most significant asset individuals have and it’s important to know how it will be treated in bankruptcy. How your home is treated is a complicated question, as there are numerous variables. If you don’t have significant equity in your home, claiming bankruptcy will not usually affect your home. You should speak with a trustee about your unique situation. Your trustee will review all of the options, including those that let you keep your home.
If you own your home, a consumer proposal is often a better option compared to filing an assignment in bankruptcy.
Can I keep my home?
If the equity in your home after deducting the mortgage is less than $10,000 (in Ontario), your home is an exempt asset and, provided you are current on your mortgage and continue to be current, you can keep your home.
If the equity in your home is greater than the exemption, the Trustee will need to realize on this equity and someone will need to ‘buy’ the equity from the Trustee. The Trustee will work with you to determine a fair value for your home which will form the basis of a negotiation between you and the Trustee. This is usually through an opinion from a specialist in real estate or by way of an appraisal. We will also request mortgage statements and other information to determine the total equity in the property. After the value is determined, your Trustee will review these figures with you and negotiate a value for your home.
Once a value is reached, the Trustee can enter into an agreement for someone to purchase the equity in your home from the Trustee.
Should I keep my home?
If there is negative equity in your home, the answer is probably no.
If there is minimal equity in your home, we will review this question with you. While home ownership creates a sense of pride and connection, sometimes it may not be ideal to keep your home. If your mortgage payments and costs of your home are out of line with your income, particularly if your mortgage payments are at high interest, you may wish to voluntarily sell your home. If you don’t sell your home, you may have to ‘buy’ the equity from the Trustee.
Can the bank take my home because I filed for bankruptcy?
No. So long as you are current on your mortgage payments, the bank can not take your home solely because you filed an assignment in bankruptcy.