Judgement on my house, can they force me to sell?

Question: I recently closed a business and there was an outstanding amount of $50,000 owed to a bank. We had tried to negotiate a debt settlement payment schedule with them, as we have excellent credit and did not want anything to tarnish this. We had agreed to a payment schedule, and awaited the documentation from the bank. A month passed, and we received a letter from a lawyer instead. We called the bank and they explained that it was out of their hands. We were appalled, but tried to continue to discuss the situation with the bank. I also left a number of messages for the lawyer, but we kept missing each other’s calls. End result, they got a judgment against us, and our house. We asked them to accept a 25% lump sum payment, and additional substantial payments on a monthly basis if they would remove the judgment. They said they would not, and that if we did not make substantial payments monthly, which we cannot afford, that they could force us to sell our home and recoup the proceeds from there. There is sufficient equity in our home to cover this, but barely. Is this correct, or if we continue to make payments, however small these may be, can they still force us to sell?

House Lien

Unfortunately it is true that a bank does not have to accept any informal offer of debt settlement. If a creditor has a judgment against you, and if they have registered the judgment on title against your home, the judgment as the effect of a second mortgage.  If you don’t make the payments they want, they can force a sale of your home. In general, if they are getting payments, they will not go to the trouble of forcing a sale.  However, they have the legal right to do so.

Since the lien is already registered we would advise you to consult a lawyer so that you fully understand all of the legal ramifications of your situation. It may be helpful to get an appraisal of your home to see if there truly is enough equity value in the home. Don’t forget to include expenses like real estate fees, property taxes and closing costs when estimating your equity.

If this situation sounds like yours but the lien has not yet been registered, filing for bankruptcy or a consumer proposal can provide your protection from your unsecured creditors.  If this is the case, contact an advisor for help.

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