Can I keep my house if I go Bankrupt?

Today I met with a married couple who own a house, but due to her job loss and his reduced hours at work, they are now unable to service their debts. They used their credit cards to survive while she was off work, and even though she has found another job, they don't earn enough each month to pay all of their credit card bills.

Their most pressing question: "If we have to go bankrupt, will we lose our house?"

The answer depends on the value of the house, and the amount owing on the mortgage. If there is positive equity in your house, if you go bankrupt, you must either surrender the house to the trustee, or pay the trustee the value of the equity, which is then distributed to your creditors.

I advised the couple to get an appraisal on their house so we have accurate numbers to help make this decision. Based on our rough numbers, it appears there is about $10,000 in equity in their house, so bankruptcy may be a problem

I suggested that instead of going bankrupt and losing their house, they could try a consumer proposal. If in a bankruptcy the creditors would expect to receive $10,000 for their house, we could offer as a proposal perhaps $15,000, to be paid over a period of 50 months (at $300 per month).

The creditors may accept that proposal, since it's more than they would get in a bankruptcy. It's also a good deal for this couple, since they don't lose their house, and they can afford to pay $300 per month.

There are other factors to consider before deciding if a proposal is the correct option, so if you or someone you know is in a similar situation, I encourage you to e-mail me and I or one of our associates can meet with you to review your situation and work out a plan that works for you and gives you a fresh start.

Posted by J. Douglas Hoyes, CA, Trustee @ 9:10 PM

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