My fiance and I are living with her mother. Her mother's debt load is so large that we were thinking of selling her home, and she would give us the money left after paying bills to use as a down payment on another home but in our name. However, my fiance's mother has just been contacted by an agency over an $11,000 cosigned loan that has been unpaid for over 6 months. If she declares bankruptcy now, would she be able to keep her home, and then sell it afterwards? (She still owes about $25,000 on the mortgage, and her home is worth about $85,000)

The exemption for a personal residence in Alberta is $40,000. Any equity (value after payment of the mortgage) over the $40,000 exemption must be recovered by the Trustee for creditors in a bankruptcy. If she sells the house and puts all the proceeds into another house in someone else's name, the Trustee would be required to overturn the transaction and recover the non-exempt equity.

Ann Clarke
phone: (403) 296-2972
aclarke@moneyhelp.ca