Can We Keep The House?

  • By Jillian Taylor-Mancusi

If you’re considering a bankruptcy in Manitoba, there’s a good chance you’ll 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 close to taking on the significance of the family home. It’s where your kids grew up (or they’re maybe still 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 or bad financial decisions – you’re suddenly 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 Trustee, taking into account the exemption, joint tenancy, ownership, equity, and cost of sale. If it is determined that you can choose to keep your home, 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.

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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 payment, 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 will allow two, possibly even three payments to lapse before taking action such as foreclosure. Are your property taxes up to date? If not, they would need to be brought up to date as well.

Can You Afford to Run 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 if you’re not 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 to retain the house or not.

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 better.

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 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.

Remember: once you’ve continued your mortgage payments after filing for bankruptcy, you have recommitted to the debt, and it will not form part of your bankruptcy. 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 you fully understand the implications regarding home ownership. Everyone’s situation is unique, and requires careful consideration with expert advice. Be sure to consult a Licensed Insolvency Trustee to discuss your options.

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