Can We Keep The House?

If you’re considering a Bankruptcy in Manitoba, you may be able to keep the family home.

You’ve worked hard for everything you’ve accumulated over the years. And of all your possessions, none come even close to taking on the significance of the family home. It’s where your kids grew up (or they may still be growing up there), and owning it fills you with tremendous pride. You may have built up some equity in it, too.

Now, having hit hard times – whether due to the loss of a job, illness, or other cumulative problem – you’re now faced with some tough choices about many things, including your home. Do you sit tight and hope things turn around, all the while accumulating more debt, or do you take some definite action that starts you on the road to recovery right now?

The bottom-line is that if you do declare Bankruptcy, there’s a good chance you will be able to keep your home. Manitoba provides an exemption for some equity in your home in the case of a Bankruptcy. Whether you can keep your house or not will be carefully calculated by your Licensed Insolvency Trustee, taking into account the exemption, joint tenancy, ownership, equity, carrying costs, and cost of sale. If it is determined that keeping your home is a workable option, then you need to make sure that it really is the best option for you and your family.

Take a look at the following factors that might ultimately affect your ability or desire to retain ownership of your home. While reviewing these areas won’t provide a definitive answer regarding tackling your debt problem, it will at least give you some sense as to whether you can afford to keep your home.

Can You Afford Your Mortgage?

An important consideration is your mortgage, which is likely your biggest single monthly expenditure. If you file for Bankruptcy, your debt load will be considerably reduced. Could you afford the mortgage if it was your only debt? Another key issue to take into account is whether you have already fallen behind on your mortgage payments, and how far behind you are. Can you catch up? If this is a possibility, then, is your mortgage lender prepared to work with you? Some lenders will allow two, possibly even three payments to lapse before taking action such as foreclosure. Lastly, are your property taxes up to date? If not, they would need to be brought up to date as well in order for you to keep the home.

Can You Afford to Maintain Your Home?

Are you able to afford the monthly costs of homeownership, such as utilities? If you’ve fallen behind in any of these areas you may have liens placed against your home, something that will raise a red flag for mortgage lenders, and possibly even lead to a forced sale, even though you are not actually behind on mortgage payments. Are you also planning on retaining a vehicle? If so, will you have payments to make for it as well? A careful look at all your monthly costs, once the current debt load is gone due to the Bankruptcy, will be a necessary part of making the decision on whether or not to retain the house.

Do You Have Equity in Your Home?

Finally, make sure you know how much equity you’ve built up in your home if any. It’s not difficult to figure out: it’s the balance between the home’s value and what you owe your mortgage lender. If the amount of equity is high, your Trustee may suggest that you consider an alternative to Bankruptcy, such as a Consumer Proposal. If you have a small amount of equity in your home, your chances of being able to keep it after Bankruptcy are very good.

It’s important to realize that whether or not you decide to keep your home after Bankruptcy will affect your future financial stability. The home may give you an excellent opportunity to build up your credit rating again as you continue the mortgage payments. On the other hand, if you can’t really afford the mortgage and upkeep of the home, it will take you back down the same path of debt and, ultimately, insolvency.

It is very important to know that once you have continued your mortgage payments — even one payment — after filing for Bankruptcy, you have recommitted to that debt. This means that, should you decide at a later time that you cannot continue the mortgage payments, you will have lost the opportunity that the Bankruptcy provided for you to walk away from the property with no residual debt. This means that the time to do the budgeting and reach a good decision, is not six months down the road, but right at the time of the Bankruptcy.

If you’re concerned about your ability to keep your home, then it’s time to seriously consider the alternatives. And when doing so, it’s extremely important that you fully understand the implications regarding homeownership. Everyone’s situation is unique and requires careful consideration with expert advice. Be sure to consult a Licensed Insolvency Trustee to discuss your options. Give LCTaylor a call to set up a free, confidential consultation. The sooner you get the information you need, the more options you will have available to you.

Leigh C. Taylor, LIT

Leigh has been working in the insolvency field since 1975. He is a graduate of the University of Manitoba. Leigh began his career as an Official Receiver with the Office of the Superintendent of Bankruptcy. He is a Certified Professional Accountant, and he attained his license as a Licensed Insolven Read More Leigh has been working in the insolvency field since 1975. He is a graduate of the University of Manitoba. Leigh began his career as an Official Receiver with the Office of the Superintendent of Bankruptcy. He is a Certified Professional Accountant, and he attained his license as a Licensed Insolvency Trustee in 1980.Leigh has been a member of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) since its inception. He is a Past President of several organizations, including the Manitoba Association of Insolvency and Restructuring Professionals (MAIRP), the Armstrong Point’s Association, and the Manitoba Opera. In addition, he has served for numerous years in leadership roles in Winnipeg churches. Close