It's your home, so you always pay your mortgage, but you are falling behind on your credit cards and other bills, and you worry that you may soon also fall behind on your mortgage payments. You worry that you may lose your home. You need your car to get to work, so losing your vehicle is not an option either.
With up-to-date mortgage payments, car loan or lease payments, filing for bankruptcy does not mean you will automatically lose your house and car. In fact, declaring bankruptcy can actually help you save your home and vehicle.
How Does Bankruptcy Affect Your House?
About 1 in 4 people who filed bankruptcy with Hoyes, Michalos owned a house. In all cases we can show you how to keep your house, even if you decide to claim bankruptcy. We will focus on three possible options:
- Keeping your home
If the equity in your home is worth $10,000 or less, all you need to do to keep your home is maintain the mortgage payments. Your mortgage lender cannot foreclose on your home just because you went bankrupt.
Should you declare bankruptcy and your house is worth more than $10,000 above the mortgage (after deducting selling costs) you will need to pay the bankruptcy trustee the equivalent of any equity value in your home.
This is a complicated area of insolvency law in Ontario and we recommend you talk to a trustee about your situation.
- Selling your home
By eliminating unsecured debt, bankruptcy can lower your debt payments enough each month that meeting monthly mortgage payments is much easier. However if you are behind on your mortgage payments and determine that even after filing bankruptcy you still cannot afford your house, you can opt to sell your home as part of your personal bankruptcy. Any shortfall will be processed as an unsecured creditor claim, any equity will be realized by the bankruptcy trustee to be distributed to your creditors.
- Filing a consumer proposal
One of the most popular ways to keep a home with significant equity value when you are in financial trouble is to file a consumer proposal. A proposal to your creditors would include a payout plan for any equity value in your home. The difference between a bankruptcy option and a consumer proposal is that you can spread those payments over a longer period of time.
How Does Bankruptcy Affect Your Car?
As a starting point, any motor vehicle worth $6,600 or less in Ontario is not considered an asset in a bankruptcy and cannot be seized by a bankruptcy trustee. If you own a car outright worth more than that amount, you can propose to ‘buy out’ the realizable portion from your trustee over the period of your bankruptcy.
If for example you have a car worth $8,000, you would have to pay your trustee $1,400. You could do this by making additional payments of $156 during a typical 9 month bankruptcy. If that monthly payment is too much, talk to our trustees about a consumer proposal.
If you lease or finance a vehicle and file for bankruptcy, you have the option of continuing with your financing payments or getting out of a car loan by handing back the vehicle and allowing your leasing company or lender to file a claim for any unpaid balance in the bankruptcy.
Discuss Your Bankruptcy Alternatives
Worrying about your home and your family is natural. For most people it's not the mortgage or car loan that's the problem; it's the credit cards, lines of credit, payday loans and other bills.
At Hoyes Michalos, we can help. In many cases you can file bankruptcy and keep your home and car. For over half of the people we meet with a bankruptcy is NOT necessary; a consumer proposal is a better solution and even if you do file bankruptcy, we still offer alternatives.
The longer you wait, the greater the risk that you fall behind on your mortgage and car payments, and that will put your hard-earned assets at risk.
To learn how to deal with your debts AND keep your house and car, contact a Hoyes, Michalos professional today.
By contacting Hoyes, Michalos & Associates Inc. you gain access to one of Ontario's largest and most experienced consumer proposal and bankruptcy firms.Get A Free Case Evaluation