Bankruptcy Ontario Blog » bankruptcy and mortgage

Divorce, Home Reposession, etc… and personal bankruptcy.

Questions — Mon, 22 Feb 2010 06:38:00 +0000

Question: I am in a very difficult situation. I am recently separated from my wife of 21 yrs. She has filed for divorce. She left me with all of the bills, two mortgages, etc… and also has petitioned for spousal support.

Based on my current income here is my situation:

- I take home slightly more than $6500/ month
- My ex-wife is entitled, per the courts, to $2900/ month in spousal support.
- I give her $1100 per month in child support.
- Between the two mortgages, I owe approximately $130,000 more than the house could be expected to get on the open market. I have defaulted on the two mortgages, and the mortgage companies have threatened to garnish my wages.
- I also have over $10,000 in credit card debt.

Between all the debts I owe, the spousal and child support, the credit card bills, my living expenses, etc… I do not take home nearly enough to live on.

What are my options?
Is bankruptcy my only alternative?
If I declare bankruptcy, what will follow?
Should I take a job in another country, can my creditors and ex-wife compel payment still?

I need help.

Answer: You should start by talking to two professionals: a divorce lawyer, and a bankruptcy trustee. Your divorce lawyer can advise you on what you will be required to pay in child and spousal support, and can advise you on whether or not you are required to continue paying if you live the country.

Even though your house is worth $130,000 less than the amounts owing on the mortgages, you could keep the house, and keep paying the mortgages. Whether or not you can do that will depend on whether or not you have the cash flow to carry the mortgages.

Alternatively, f your house is worth $130,000 less than what is owing on the mortgages, there is probably no financial reason for keeping the house. Your best option may be to surrender the house to the first mortgage holder, and let them sell it. You will then be liable for the shortfall of perhaps $130,000, which may be more than you can service.

You could then file either a consumer proposal or bankruptcy in Ontario to deal with the debts. The correct option will depend on what you can afford to pay each month, which will depend on what you are paying in child and spousal support. This analysis is somewhat complicated, so you should discuss this with an Ontario bankruptcy trustee.

Obtaining a Mortgage Post-Bankruptcy

Questions — Wed, 21 Jan 2009 17:29:00 +0000

Question: I previously declared bankruptcy and was discharged 9 months ago. I am in the process of getting married and we are looking at purchasing our first home. I have made sure to pay all my bills on time since the discharge and my fiance has impeccable credit. When we approach our bank for a pre-approval will they take both her and my annual salary into account when determining our mortgage pre-approval amount, or hers alone? Additionally, we have approximately 120K saved to put down.

Answer: The bank will take both incomes into consideration. If you have suitable income, and a significant down payment, you should still qualify for a mortgage, even during this credit crisis.

mortgages and bankruptcy and foreclosure

Questions — Sat, 13 Dec 2008 02:20:00 +0000

Question: Hi, If I surrender a property to the bank at the time of my bankruptcy, will it also show up on my credit report as a foreclosure? If so how long does it stay on the credit report? I know that the bankruptcy will stay 6-7 years, but will there be a foreclosure there? Is surrendering the property at the time of bankruptcy the same as a foreclosure?

Answer: The answer depends on how the bank reports the foreclosure to the credit bureau. In most cases the word “foreclosure” does not appear on your credit report. What will appear is the amount of the debt that was included in your bankruptcy, which generally is the amount of the mortgage company’s shortfall after your house is sold.

Technically surrendering the house at the time of the bankruptcy has the same effect as a foreclosure, except that you are doing it voluntarily. Your trustee can provide you with more information on the impact of surrendering your house prior to bankruptcy.

mortgage and bankrutcy

Questions — Sat, 24 May 2008 14:31:00 +0000

Question: Here is my situation i bought a house a year ago this year i found out my septic needs to be replaced and my water well is under the garage.
I can barely pay the bills now, i cant afford a new septic and well, and i soon won’t be able to live here much longer.
I cant sell the house for even half of what i owe on it.I also have about 35000 in visa and unsecured loans.

my questions

1)does the bankruptcy take care of my mortgage

2)should i go bankrupt before or after foreclosure does it make a difference?

thank you

Answer: If you know for sure that you cannot afford to continue living in the house, the best answer may be to find a place to rent now, surrender the house to the bank, and then consider a consumer proposal or personal bankruptcy. In either case the shortfall on the mortgage would be included in the proposal or bankruptcy.

If you go bankrupt and continue making payments on the mortgage, and then some months after the bankruptcy starts decide to surrender the house, you would be liable for the shortfall; the shortfall would not be included in the bankruptcy.

As the real estate market gets worse in Ontario, mortgage foreclosures are increasing. This is a complicated area, and it is important that you get good advice before making a decision, so we strongly recommend that you arrange for a no-charge initial consultation with a licensed bankruptcy trustee.