Scott, Pichelli & Easter - Licensed Insolvency Trustee, Hamilton, Burlington, Oakville, Stoney Creek 
Scott, Pichelli & Easter


Bankruptcy or Proposal FAQs

How does Bankruptcy affect my house?

How does bankruptcy affect my house?

One of the most common concerns people have when considering bankruptcy is whether or not they will lose their home.

In most cases you do not lose your house when you file for bankruptcy. To explain why, we will look at two case studies.

The Jones’ owe three hundred thousand dollars on their home and together they are considering bankruptcy. A real estate appraiser estimates that their home is worth about three hundred and ten thousand dollars. However when you deduct real estate commissions, outstanding property taxes and other selling costs, it turns out there would be nothing left over if they sold their house today. That means that there would also be nothing left for the creditors if their trustee were to try to sell their home. In this case, the Jones’ won’t lose their home.

Because there is no equity in their home, as long as they are able to keep up with their mortgage payments, the Jones ‘can continue to live in their home and build equity for their future even if they go bankrupt.

Susan Smith also owns a home with a mortgage.  The trustee estimates that if Susan sold her house, paid the commissions and selling costs, and paid off her mortgage, she would be left with eight thousand dollars. To keep her home if she goes bankrupt, all Susan has to do is pay the trustee eight thousand dollars.

But what if Susan doesn’t have eight thousand dollars, or can’t get it from her family, or a bank?
Not to worry. Susan could talk to her trustee about filing a consumer proposal.  She could offer to pay her creditors a little more than eight thousand dollars and spread out her payments over a maximum of five years. If the creditors agree, Susan can keep her house and avoid bankruptcy.

The point of these stories is that you do not automatically have to lose your house just because you filed bankruptcy. You have options to keep your home as long as you are able to pay your mortgage payments on time.

When you meet with Joel Easter or Peter Pichelli, they will help you determine if your house has equity and then help you explore your housing options.

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