What Happens to My House After Declaring Bankruptcy?

What Happens to My House After Declaring Bankruptcy?

Deciding to declare bankruptcy often comes during hard times of your life.

If you are planning to file for bankruptcy, the chances are that you are concerned about how you can manage your finances now and in the days to come.

For many, the main concern might be that you may not be able to keep your most valuable piece of property: your home.

You may be asking yourself “what happens to my house after filing bankruptcy?”

Well, read on to learn if you will lose your house in bankruptcy.

In the event that you possess a Home

In the event that you possess the home you live in, the official collector might need to put it on offer to help pay your insolvency obligations.

This applies, whether you own the house or have leased it for a particular duration.

Also, the collector can still put it on offer regardless of whether you own the house individually or jointly.

However, you should avoid giving away your house at a lower price to protect it from falling on the hands of the collector.

Such action will only lead to losses.

Preventing Home from Being Sold

There are a few circumstances where you might probably counteract or postpone your home from being sold as pointed out below:

  • If you have family or dependents living in your home. It is possible to delay the sale for a pre-agreed duration to allow for alternative living plans.
  • You can request the court to sell the property to your partner or a family member who has the resources to help you. This will ensure you remain in your home albeit with a different owner or family member. Hence, if a chance arises to purchase back the property in the future, it will be possible.
  • If you risk losing your house in bankruptcy, contact local authorities sooner than later. They will consider your situation to see if you are eligible for re-housing help. However, if you have sold your house to avoid going bankrupt, the local authority may not offer you alternative housing because you are intentionally homeless.

Home Equity and Bankruptcy

Home equity is the value of your property after deducting the taxes owed and mortgage.

If you possess a significant amount of equity in the house, it likely that the house will not be sold.

A case example is if you file for bankruptcy in the Greater Vancouver region where there is a $12, 000 home exemption.

In case you have $15, 000 home equity, you are supposed to pay the difference to the trustee, which is $3,000, so as to keep the house.

You can source the money to pay for the equity from friends, family, or by taking a second mortgage.

Markedly, the process of filing for bankruptcy should be fair for you and your creditors.

As such, it will not be fair to keep the majority of equity if you are being discharged from all your debts.

In the event that you have some home equity, you can discuss with your trustee regarding alternatives ways through which you can settle your debts.

However, if you are not in the position of paying this difference, especially if the home equity is low, there is a high likelihood that the home will be lost to the bankruptcy trustee.

The better option would be getting a consumer proposal as a way of paying the debts.

This will allow you to retain all your assets.

Renting a Home & Bankruptcy

If you reside in a rented home, you will most likely retain it even after going bankrupt.

Regardless, there are still some situations which can put the house at risk which includes:

  • In case the property is part of the bankruptcy estate: This will rarely apply to most assured, secure, and regulated tenancies. The only time it will become an issue is if you financially benefitted from the tenancy agreement.
  • If the tenancy agreement states that when one is declared bankrupt, they should not reside in the property.
  • In the event that there are rent arrears or other possession reasons already in place.


Bankruptcy is the final course of action for most people facing serious financial problems.

Despite the negative implication, bankruptcy is the best solution since it immediately removes the burden of serious debt.

However, the biggest potential loss when you file for bankruptcy is your home.

For many people, their home is the main and most important asset.

If you find yourself in a financial hardship, it can seem like there is no way out.

Licensed Insolvency Trustee can assist you to identify the right actions to take, even if you are facing the prospect of losing a home.

Contact Licensed Insolvency Trustee for assistance today.

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