Tag: What is Bankruptcy

Will I lose my house if I go Bankrupt?

In a bankruptcy, assets in excess of your allowed personal exemptions are realizable by the trustee. That means that the trustee is required to collect and distribute the proceeds to your creditors, either by taking over and selling those assets, or by calculating the sale value, and arranging terms for you to pay that amount to the estate.

If you have equity in your house, say $23,000, the trustee has to realize $23,000 (or some other negotiated amount) to your estate. There are two main choices: either sell the house to get the $23,000, or arrange with you to pay the $23,000.  It is not the house that the trustee cares about, it is the equity.  Most people prefer to make the payment arrangements and keep their house.

If you purchased your house recently, even if it is in your spouse’s name, the trustee will ask you questions and require documentation to show where the funds came from to purchase the property.  You have an obligation to provide that documentation.  If you have concerns about a recent property purchase in respect of a bankruptcy, make sure to discuss your options with a trustee before making a decision.

Finally, if your home is costing you more than about 30% of your monthly income, it may be too heavy for you to carry. As hard as it may seem, sometimes the best choice is a third one: return the house to the bank as soon as (or before) you file the bankruptcy or proposal. Any shortfall or penalty is covered, as long as the timing is right. Talk to your trustee to help determined the best choice for you and your family.

Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.