It`s true. You can declare bankruptcy and keep your home. That said, there is a catch. There`s always a catch…
The bankruptcy system was designed with fairness in mind. It wasn’t designed to leave bankrupts penniless, or allow them to drive Mercedes without paying their bills. While some assets are exempt in the province of Ontario, a bankrupt’s home is not. As a result, if you could turn your home into cash, then you have two options:
1) Have your Trustee in Bankruptcy sell your home and distribute the net proceeds to your creditors; or
2) Estimate the net proceeds payable to your creditors, keep your home, and pay that same amount to your Trustee in cash on a monthly basis over the course of your bankruptcy.
For example, John’s home is worth $300,000. Let’s calculate how much cash that John would receive if he sold his home.
After selling the home for $300,000, John’s lawyer has to pay a number of people before John, namely:
1) $260,000 to TD CanadaTrust for John’s mortgage;
2) $15,050 to TD CanadaTrust for John’s secured line of credit;
3) $16,950 for Real Estate Commissions, including HST (5.65%); and
4) $3,000 for mortgage penalties (3 monthly payments)
for a total of $295,000 leaving John with $5,000. As described above, John could either allow the Trustee to sell his home or pay $5,000 in monthly payments over the course of his bankruptcy to the Trustee.
The reality is that after deducting real estate commissions, legal fees, mortgage break fees, and any unpaid property taxes from the value of your home there often isn’t much if anything left. In fact, some of our clients even have “negative equity”; that is where they would be left with a bill even after selling their home. In this case, bankruptcy provides an excellent opportunity to get rid of your home and all of the debt associated with it.
If you own a home and are considering bankruptcy or a consumer proposal, the first step is to obtain an “opinion of value” from a licensed realtor which will give you an accurate idea of what your home would sell for. Welker and Company requires a written opinion of value before we can assist you in filing either a consumer proposal or assignment in bankruptcy.
The best way to determine if you`ll be able to and should keep your home after filing for bankruptcy is to contact a Trustee at Welker and Company and discuss your personal situation. We never charge consultation fees and are always happy to help however we can. Give us a call or fill out the form below and let us impress you with our prompt response.