In most cases, the mortgage company will allow you to renew your mortgage after bankruptcy as if you haven't filed for personal bankruptcy.
When you go bankrupt, your trustee will determine if there is equity in yourresidence. Equity is defined as the difference between what the house is worth, and what is owing on the mortgage and other encumbrances (like outstanding property taxes). If there is equity in your residence you may be required to pay this equity to the trustee. In many provinces, including Alberta where the exemption is $40,000 per home, you will be able to keep some equity in your residence. Details of the exemptions for residences, and other assets are contained in the Assets You Can Keep section.
If there is non-exempt equity, under condition that you contribute the amount equal to the non-exempt equity into your bankruptcy (perhaps by borrowing from family or getting a second mortgage - which is difficult if you are bankrupt), the trustee will allow you to keep your house.
Here's an example:
If you went bankrupt one year into a five year mortgage; there is no equity in your house. When your bankruptcy is over, will the bank allow you to make your mortgage renewal?
Most mortgages contain a standard clause that says something like "if you go bankrupt, we can foreclose on your house". Even though that term exists, banks virtually never foreclose just because you went bankrupt.
The reason is simple: the bank would prefer to have you make the mortgage renewal and continue paying off both the principal amount and the interest, for the next 25 years, than to foreclose and risk losing all the future profit plus an additional amount of money by selling your house at a discounted foreclosure price.
To be sure you should check with your lender, but in most cases, provided that mortgage payments are up to date, bankrupts are able to make a mortgage renewal after bankruptcy.
Our qualified Alberta trustess are familiar with all aspects of
Canadian bankruptcy law. We currently have offices in
Calgary, Wetaskiwin, and Edmonton, Alberta, Canada.
Call now for a free consultation: 310-8888
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