How Does Property Outside Of Canada Factor Into A Bankruptcy

​​​When an individual declares personal bankruptcy, it is sometimes referred to as filing an assignment in bankruptcy. This language comes from the basic concept of bankruptcy law in Canada. When you declare bankruptcy, you are assigning your assets to the Trustee so they can sell them and provide your creditors with some compensation for the debt that you owe.​ If you are grappling with the realities of unmanageable debt and happen to own property outside of Canada, the Trustee you are working with will help you assess all of the options available to you, factoring your property into the decision making process as you work together to decide which course of action is best for your unique financial situation. Should you decide that the best route forward is filing for bankruptcy, it’s important to note that in Canada, property that a bankrupt individual owns in another country is not protected by bankruptcy legislation. When you own this type of property, that doesn’t mean you will automatically lose the property or that you won’t qualify for bankruptcy proceedings. The Licensed Insolvency Trustee will take steps to determine what will happen with that property during the bankruptcy process and then inform you of the possible outcomes before you make a decision about proceeding with your bankruptcy filing.What is the Property Worth? One of the first things a Trustee will do is determine the value of your property and if there would be any money available for the creditors if this property was sold. Some general questions you can expect include:When did you purchase the property and what did you pay for it at that time?Do you have any mortgages or liens against the property?Are there any other individuals that co-own the property?Have you ever had the property appraised and if so how much was it appraised for and when was that appraisal completed? The Trustee will also want any and all documentation that you have available to support the information you are providing regarding this property. This can include mortgage statements, paperwork from the time of purchase and copies of any appraisals that you may have in your possession. You can expect the need to obtain an appraisal of the property completed by a certified appraiser familiar with the area where the property is located. In today’s global economy it is relatively easy to locate and engage the services of such a professional in many different countries. If your property has no value for the creditors, then you can make a nominal offer to the Trustee to purchase their interest in your property. In most cases this offer is very reasonable and once satisfied the Trustee will release their interest in the property back to you.What if the Property has Value? When the property has value it is the Trustee’s duty to make all reasonable attempts to realize upon the asset for the creditors. Deciding the best way to proceed in this case is not always easy. There are three potential outcomes in most cases:Listing the property for sale;Asking the bankrupt if they would like to make payments to their bankruptcy estate equal to the amount of the available equity so they can keep the property;Determining if the costs associated with liquidating the property outweigh the potential benefit for the creditors and therefore allowing the bankrupt to keep the property. The location of the foreign property can be a factor when making a decision about how to proceed. If you own property on a completely different continent it can be difficult to attempt to sell the property and more importantly, can be costly. The Trustee must assess the potential costs for selling the property in comparison to the expected proceeds for the creditors. This may also be a factor if you are a co-owner of foreign property. Dealing with the other owners to obtain a settlement on your share of the property, particularly if that property is located abroad, can be too costly for the Trustee to pursue. In this case it is often easier to make a settlement directly with the bankrupt. The type of property can also decrease the value for the bankruptcy estate. For example, a time share is often very difficult to sell for a fair price as the market is flooded and there are fees associated with owning time shares that limit the value to potential purchasers. In this case, a Trustee would much rather make a reasonable settlement offer with the bankrupt whereby the creditors receive something for the time share’s value and the Trustee does not have to go through a lengthy futile process of selling the asset.Do I have to Disclose my Property to my Trustee? The short answer is yes. It is your legal obligation to disclose all of your income and assets to the Trustee when you file for bankruptcy. If you fail to disclose an asset to the Trustee and the Trustee finds out about this asset, it will delay and complicate the bankruptcy process. You will more than likely end up in bankruptcy court where the consequence of failing to perform one of the required duties of bankruptcy will affect your ability to get discharged from your debts.Consider all Options A qualified debt advisor will be able to help you make the best decision for dealing with your debt issues while taking the property into consideration. Bankruptcy law may not allow you to exclude the property from your bankruptcy proceedings completely, but as you can see the outcome may not be as bad as you feared. A licensed Trustee will also explain any other options available for tackling your debt that may be better choices in light of the property you owe abroad. A free consultation with a Licensed Insolvency Trustee or a trusted debt advisor is a great first step. Doug Stuive is a Licensed Insolvency Trustee working within the Niagara Region. To learn more about how MNP Debt can help, contact our local office at 905.358.5554.