What Happens To My Mortgage When I Declare Bankruptcy

Each province has a list of assets that you get to consider keeping when you file for bankruptcy.  In Alberta, you are allowed to keep $40,000 equity in your principal residence, so long as you continue to make your mortgage payments.   (For a complete list, click on http://www.mnpdebt.ca/personal/faq/bankruptcy/default.aspx#q8). Assuming you are below the $40,000 equity (value of the property less the mortgage owing), you need to decide first if you want to try to keep the property or if you want to walk away from it.  If you want to keep it, you need to make the mortgage payments and so long as those are made, the lender can not foreclose on the property because of the bankruptcy. If you can't afford the property any longer but there is some equity in it, you need to be careful as to the timing of filing for bankruptcy and the timing of listing the property for sale.   The equity in a property listed for sale at the date of bankruptcy would be list.  Essentially, you don't want to list it just yet. If there is no equity in the property and you want to walk away, the shortfall owing would be a debt included in your list of creditors.  It would be included in your bankruptcy, or included in a proposal you may make. Give one of our Trustees in your region a call to discuss the specific equity in your property before deciding how best to deal with your credit cards and loans. Donna Carson, CGA, CIRP, Trustee 1.877.500.0792 [email protected]