Are Debts Affecting Your Ability To Keep Up With Your Mortgage
Ask yourself this question: If I could deal with all of my other debts, would paying my mortgage be easier? We help people answer that question every day.
Its 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 can file bankruptcy even if there is equity in your home. If you owe more money to your creditors than the value of what you own you are considered insolvent. If you are insolvent you are eligible to file for bankruptcy or proposal in Canada.
With up-to-date mortgage payments filing for bankruptcy does not mean you will automatically lose your house. In fact, by eliminating other debts that are making it difficult to keep up with your mortgage payments.
What If There Is No Equity
No equity means that you owe more to the creditor than the house is worth.
For example: you owe $400,000 to the bank on your mortgage, and the current value of the house is $320,000. This means you have no equity in the property and owe $80,000.00 to the bank.
Your trustee or a secured creditor can still make a claim against your house, even if there is no equity.
What Happens After Filing For Bankruptcy In 2021
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In a Nutshell
Knowing what happens after you file bankruptcy can make it seem less intimidating. Read on to learn about filing Chapter 7 bankruptcy, the meeting of creditors, keeping your car, and why creditors must stop contacting you after filing.
Knowing what happens after you file bankruptcy can make it seem less scary. Read on to learn about filing Chapter 7 bankruptcy, the meeting of creditors, keeping your car, and why creditors must stop contacting you after filing.
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Student Loan Hardship Options
If youre struggling with student loan debt, know that bankruptcy wont discharge that debt. However, there are options to make your payments more manageable.
Borrowers with federal student loans can choose to pursue deferment or forbearance for up to three years total. Depending on the type of student loans you have and the type of relief you choose, interest may still accrue during this time. Through Sept. 30, 2021, all federally owned student loans are automatically under forbearance with no interest accrual.
Another option for federal borrowers is to switch to an income-driven repayment plan with a loan forgiveness option. This will extend your repayment timeline, but because the plan bases your student loan payments on your actual income, your monthly payment may be as low as $0.
If you have private student loans, you may still be eligible for deferment or forbearance options. This depends on the lender if youre facing financial hardship, call your lender and ask about your options.
Foreclosure Or Bankruptcy: The Worst
The ultimate result of mounting missed payments is foreclosure.
The foreclosure process generally begins after mortgage payments are 90 days in arrears subject to the discretion of the lender. Your lender will try to get in contact with you throughout this time to help you find a solution to this issue. If they dont hear back from you they assign your mortgage to a law firm which will correspond initially and then issue a statement of claim pursuant to enforcement of the mortgage. The law firm will continue with foreclosure action and eventually obtain an order that you vacate the property.
In Alberta, judicial foreclosures, or judicial sales, use the court system to allow lenders to realize on their security. After foreclosing on a home or obtaining an acceptable offer to purchase, the lender can then proceed to sell it with the courts consent.
Should you have a high ratio of CMHC guaranteed mortgage, the lender can pursue you for any shortfall. You may choose to file for bankruptcy, in order to deal with this liability
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Can I Keep My House If I File Chapter 13
If you have sufficient income to keep up with your mortgage, you will not lose your house. Chapter 13 bankruptcy involves a 3 – 5 year repayment plan. Long-term secured debts, like home mortgages, remain in place. Just like after a Chapter 7 filing, youâll continue to make your regular monthly mortgage payments after filing. In other wordsâ¦
If youâre current with your mortgage payments â¡ï¸ everything will stay basically the same.
The Final Steps Of Your Journey Towards Lasting Debt Relief
Getting all of your bankruptcy forms prepared and filed with the bankruptcy court is usually the most time-intensive process of a Chapter 7 bankruptcy. But that doesnât mean that your job is done. There are a few things everyone filing Chapter 7 bankruptcy has to do to successfully complete their bankruptcy case and receive a discharge. Letâs take a look at what you can expect will happen in your Chapter 7 bankruptcy.
Pay Filing Fee in Installment Payments
If you can’t pay the entire Chapter 7 bankruptcy filing fee and you don’t qualify for a fee waiver, then you can apply to pay the filing fee in installments. You can ask to make four installment payments. The entire fee is due within 120 days after filing.
If the bankruptcy court approves your application, it will grant an Order Approving Payment of Filing Fee in Installments. Your installment payment due dates will be in that order. You must pay all installments on time or your case is at risk of being dismissed.
Take Bankruptcy Course 2
You will complete a credit counseling course before filing bankruptcy. There’s a second course you must take after filing bankruptcy. It covers personal financial management and can help you take advantage of your fresh start after erasing your debts through bankruptcy.
You have to take this course after your case is filed but make sure itâs be completed within 60 days from the date of the meeting of creditors. A certificate of completion must be filed with the court.
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How Does The Equity Question Come In
The equity of your rental property comes into play when youre requesting the court to cram down the mortgage of the property to an amount you can manage to pay. When the court agrees to your cram down request, its allowing you to reduce your mortgage to an amount that is equal to the current value of your home. For example, if your propertys mortgage stands at $250,000 and your propertys value is $150,000, then your debt will be reduced to $150,000.However, there is an important condition to this agreement. You will have to pay the full amount of the mortgage within the 3 to 5 years the court has set.Once you file for Chapter 13 bankruptcy, you will still need to pay your mortgage on a timely basis. Otherwise, if your bankruptcy ends while you still have unpaid mortgage balances, your property could face foreclosure since your lender still maintains a legal right to your home.By now, we believe you understand how your rental property will be affected when you file for bankruptcy. If you have any questions, visit our website via this link and request an appointment with one of our bankruptcy lawyers.
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What Happens If Your Home Is Over The Allowance
Most exemption allowances are around the $10-15,000 mark.
As youre aware, houses in Canada are worth a lot more than that.
Does this mean that you will have to relinquish your home if its above this threshold?
You still get to keep your home if it is above the exemption allowance.
It just means that you only retain equity up to the limit.
What happens to the rest of it? Well, there are typically two options:
- You seek a consumer proposal instead of bankruptcy.
Repurchasing home equity means that the remaining value of your home is bought by someone else.
They effectively use that money to pay your creditors.
This is usually done by banks or credit unions.
However, you still get to live in the home.
For all intents and purposes, it is still your home, just a large chunk of equity has gone from it.
Filing a consumer proposal is an alternative to bankruptcy where you reach an agreement with creditors on how you will pay them.
This can sometimes reduce your overall debt payments and ensures you keep all of your home and as much of the equity as possible.
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What Controls Keeping My Home After Bankruptcy
The decision to declare bankruptcy often comes at an overwhelming time of your life. If you’re thinking about declaring bankruptcy, the chances are that you’re worried about how you can manage all your finances now and in the future.
There are three factors that determine whether you can keep your home in bankruptcy proceedings:
- The Chapter of bankruptcy you file
- How much equity you have paid into your mortgage
- If you can afford your monthly mortgage payments while facing debt
How Bankruptcy Can Affect Your Ability To Get A Mortgage
Bankruptcy can significantly lower your credit scores, remain on your credit reports and affect your ability to obtain credit, including a mortgage loan, for up to 10 years. Fortunately, its impact lessens over time.
For a lender to even consider you for a mortgage after bankruptcy, your bankruptcy must be discharged. A bankruptcy discharge is a court order that eliminates your debts. In addition to making sure your bankruptcy has been discharged, a lender will look at your credit report to determine your creditworthiness.
It’s a good idea to check your credit report before you apply for a home loan to make sure it’s accurate. Look for mistakes such as incorrect or outdated information or accounts that were not included in your bankruptcy filing that are listed as part of it. Be sure to contact the credit agency as soon as possible and dispute any errors you find.
When you do begin to apply for a mortgage after bankruptcy, your lender will likely ask you a few questions about your bankruptcy. They may ask you when your case was discharged, what you’ve done to establish new credit, and how you’ve been keeping up with your bills. It’s a good idea to have the answers to these questions ready beforehand so that the application process runs smoothly.
Let’s dive deeper into how each type of bankruptcy can affect your ability to get approved for a mortgage.
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Keeping Your Payments Current
Under Canadian bankruptcy law a secured lender, like a mortgage holder, is not permitted to cancel their loan simply because you have declared bankruptcy. If you are up to date with your payments, you can continue to pay your mortgage, even while you are bankrupt.
However, if you are in arrears or , the mortgage holder is not required to allow you to continue with the mortgage. Even if you are not bankrupt, if you are in arrears the mortgage lender can start foreclosure proceedings and sell your house.
The Effects Of Bankruptcy On An Existing Mortgage
If you declare bankruptcy, there are established procedures of due process. You dont automatically lose your house. Nor is your loan accelerated to automatically become due if youve been current up to this point on your payments.
The following sections will go over how bankruptcy affects your current mortgage.
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What Happens To My House If I File Chapter 7
When you complete a Chapter 7 bankruptcy, your debts are discharged. This includes your mortgage debt. However, even though you are no liable for your mortgage, the lender still has a lien against the property .
Besides, what happens to your house when you file Chapter 7?
When you complete a Chapter 7 bankruptcy, your debts are discharged. This includes your mortgage debt. However, even though you are no liable for your mortgage, the lender still has a lien against the property .
One may also ask, what assets are lost in Chapter 7? Nonexempt Assets in a Chapter 7 Bankruptcy CaseNonexempt assets include any property that can be sold by the court. In Chapter 7 bankruptcy, the proceeds from the sale of these assets are used to pay off some or all of the creditors.
Similarly, it is asked, can you file Chapter 7 and keep your house and car?
By applying bankruptcy exemption laws to their lists of assets, most people filing Chapter 7 bankruptcy are able to keep their houses and cars if: Their budgets enable them to keep up with a mortgage and car loan payments. Loan payments, insurance, and taxes are up to date.
Can I save my house with Chapter 7?
You can use Chapter 7 bankruptcy to save your house if: you’re current on your mortgage payments when you file , and. your equity in the house is adequately protected by the exemption laws available to you in your state.
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Rehousing If You’re Homeless Because Of Bankruptcy
If you risk being made homeless because of bankruptcy or it’s already happened to you, you should contact your local authority as soon as possible. They will consider your circumstances to see if you’re eligible for help with re-housing.
If you’ve sold your home in a bid to avoid going bankrupt, the local authority may not help you with alternative housing, as it may decide you’re intentionally homeless. However, you should speak to your local authority at as early a stage as possible if this is likely to apply to you.
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The Chapter 13 Discharge
The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. Therefore, debtors should consult competent legal counsel prior to filing regarding the scope of the chapter 13 discharge.
A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor: certifies that all domestic support obligations that came due prior to making such certification have been paid has not received a discharge in a prior case filed within a certain time frame and has completed an approved course in financial management . 11 U.S.C. § 1328. The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor’s homestead exemption. 11 U.S.C. § 1328.
The discharge releases the debtor from all debts provided for by the plan or disallowed , with limited exceptions. Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.
Keeping Your Home With A Consumer Proposal
If you have house equity and cannot afford to declare bankruptcy, a better option may be a consumer proposal. In a you could offer your creditors an amount that is even greater than your house equity, but you could pay it over a longer period of time , making the consumer proposal the most affordable option.
Returning to our previous example, if you have $10,000 in house equity and no other assets or surplus income, you could offer a consumer proposal of $12,000, or $200 per month for 60 months. The $12,000 offer is slightly more than the house equity, so it is possible that the creditors will accept your proposal. Its a good deal for you, because a monthly payment of $200 is affordable, and if your situation improves you can pay it off sooner.
In summary, it is possible to keep your mortgage and your house if you declare bankruptcy, but some advance planning is necessary, so talk to a today to review your options.
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What If I Dont Want To Keep My House
Of course, not everyone sees their home as a benefit.
If youd rather get rid of it and find another place to live, then you can.
This choice is up to you, in most scenarios, you can keep your home unless you dont want it.
Need help with bankruptcy?
If so, then you need the help of a Licensed Insolvency Trustee.
Contact us now, and we will arrange an appointment to go through your financial situation in great depth.
Our team will help you figure out if bankruptcy is the right path, and how to retain your home if you choose to file for it.
Can I Stay In My Home While It Is Being Sold
Usually, if you are bankrupt, you are not expected to immediately move out of your home. In normal circumstances, the trustee will give you a few weeks to make alternative arrangements.
In some cases, the trustee may allow you to stay in your home during the selling period, provided you assist with the sale process, contribute a fair rent and maintain the home.
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