Bankruptcy in Ontario

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.

Question: I have a joint car loan (with a bank) with my ex-husband. He has taken over paying the monthly payment until he can take over the loan, but if i claim bankruptcy what will happen to the car loan? Will he be able to continue to make the monthly payment or will this loan become defaulted?

Thank you.

Answer: In most cases he will be allowed to continue making the payments on the car loan. One option would be for him to contact the bank now, before you go bankrupt, and ask to have your name taken off the loan. If the loan is entirely in his name, there should be no issues.

If the bank won’t remove your name, your husband should discuss it with the bank first, and ask them to confirm that he won’t lose the vehicle if you go bankrupt.

Question: Hi I have just about $52,000. in dept including 2 credit cards which I pay the min. I have a Line of credit of $20K and I have just been served from the Superior Courts to pay $22K.I am unemployed, no income, own a home, a car and having a difficult time paying my bills. I owe just under $6,000 on my car that is in my name and someone else. I have a house my husband pays the mortgage and land tax but I dear not mention bankruptcy against his house because that is all we have. We do have a 17 yr going to school. Can I declare bankruptcy without loosing my house and involving my husband? I am seeking deligently to find a job to offset the high dept I am in.

Answer: Whether or not you would lose your house if you declare bankruptcy in Ontario depends on a number of factors, including the value of the house, and the amount owing on your mortgage. More information is available in this article on What Happens to My House If I File Bankruptcy in Ontario?

Another option would be to file a consumer proposal, which in virtually all cases allows you to keep your house. However, if you are not working, a consumer proposal may not be an option, since you don’t have the income to make the payments.

We suggest that you arrange a no charge initial consultation with an Ontario bankruptcy trustee to review your options, and then decide which option makes the most sense for you and your family.

Question: How long after bankruptcy in Ontario can I own a car in my name?

Answer: It is actually possible to own a car while you are bankrupt in Ontario. Under Ontario law, you are permitted to own a car, with no loans against it, worth up to $5,650 when you go bankrupt. More information can be found in this article on cars and bankruptcy in Ontario.

Question: I am about to go bankrupt in Ontario. My question is, can my home be repossessed? I have about only 5% equity in it and child who is under 18 lives with me there and it is their primary residence.

Answer: If you go bankrupt, the trustee is required to take your assets and turn them in to cash. In your case, if there is only 5% equity in your house, it would not be possible for the trustee to sell your home and turn it into cash, because the trustee would be required to pay real estate commissions on the sale (probably 5%), plus legal fees and a penalty to break the mortgage, so in your case you would probably not lose your home.

We suggest you get a comparative market value assessment from a real estate agent, and a print out of the amount owing on the mortgage, and then consult an Ontario bankruptcy trustee for more information.