You can keep your house if you can come up with enough money to cover your equity, the difference between what the house is worth and what you owe on it. It may not cost as much as you think. A rough guide to your home’s equity is the current market value of your home, less the mortgage, real estate fees, legal fees, mortgage penalties, back property taxes and utilities. If you have questions about figuring out your equity call us and we will help you.
Keeping your house may not be your best option if:
When deciding if you can keep your house, you should know that when you file Ontario bankruptcy you no longer have to make payments towards your unsecured debts and therefore you may actually have more money available to pay your mortgage, property taxes and utilities. If you haven't already done so, flip to our page on personal budget planning to determine whether or not you have the ability to keep paying for your house after bankruptcy.
Even if you decide to keep your house, your mortgage company could cancel your mortgage contract if you file bankruptcy - legally they can demand full payment. Even if you've never missed a payment in the past, your mortgage company may cancel your contract, forcing you to refinance or sell your home. It’s unlikely that they will. The mortgage company makes their money off the interest that you pay (not by selling houses). If you have been a good customer and you have the ability to continue making payments, then it is in the best interest of the mortgage company for you to keep paying them.
It’s very important that you know your rights and responsibilities in regards to your secured creditors, including your mortgage, before you file bankruptcy. Your trustee will be able to answer all your questions.
The following example demonstrates how a trustee determines if you have any equity in your home.
"A real estate agent appraises your house at $115,000 and you owe the mortgage company $100,000. I've got $15,000 in equity, right?"
Not necessarily. The amount of equity in this house should be calculated as follows:
| Fair market value | $115,000 | |
| Less: Selling costs @ 6% | -6,900 | |
| Legal fees | -1,000 | |
| Mortgage penalty | -2,500 | |
| Mortgage | -100,000 | |
| Tax arrears | -500 | |
| Utility arrears | -300 | |
| Equity in the home: | $ 3,800 |
In this particular example, if you paid the trustee $3,800 before your bankruptcy was completed, you would keep your home after the bankruptcy.
Another option would be selling house after filing bankruptcy. Your trustee can help you plan your bankruptcy and explain the costs involved. Licensed bankruptcy trustees at Hoyes Michalos & Associates Inc. will be happy to help you. Call one of our Ontario bankruptcy offices, or contact a bankruptcy trustee by email today.