Bankruptcy and House and Mortgage
Question: my husband and I are considering going bankrupt due to over whelming debt. We have a mortgage and are terrified of loosing our house. Our mortgage is with the bank and we think the property value is going to be close to the mortgage that is on it now. Would they foreclose if there was say $5000-$10,000 equity?
Answer: It is doubtful that the bank would foreclose if your mortgage payments are up to date; you should contact the bank prior to declaring bankruptcy to get confirmation directly from them.
The other issue is that if you have equity in your home, the trustee in bankruptcy is required to collect that equity from you. In simple terms, if you have $10,000 in equity, you would be required to pay the trustee $10,000 in order to keep your home.
The amount of equity you are permitted to keep varies in each province, so before making a decision you should contact a bankruptcy trustee.