Question: What happens when you have 3 mortgages on your property and your property value is of a lower amount then the combined mortgages and you file for bankruptcy in Ontario? What do you think the trustee’s stand point will be?
Answer: Part of the trustee’s job is to turn your assets into cash for the creditors. If your property has negative equity, the trustee will not seize the house, because they can not turn it into cash. Assuming the three mortgage lenders agree, you could keep the house if you go bankrupt.
Practically, it may make more sense to surrender the house to the mortgage holders before you go bankrupt. By doing so any shortfall when the house is sold will be included in your bankruptcy. In most cases it is not prudent to go bankrupt and still have a huge amount of mortgage debt that will be difficult to repay. Your trustee can provide you with more information.