Is It Possible to Go Bankrupt And Not Lose My House or Car?

People often associate declaring bankruptcy with a seizure of property. One of the first questions they ask is: will I be able to keep my car? Or my house? Here are a few explanations to clarify things.

In short

It is possible for you to keep your house and car if you declare bankruptcy.

For the car you can keep it if :

You lease your vehicle, but you are able to continue making payments ;
You have a loan, but you are able to continue making payments ;
You have finished paying it off and you need it for work.

For the house you can keep it based on its equity.

If there is equity, your house can be seized.
If there is no equity and you are able to make your mortgage payments, you can keep it.

Reminder about bankruptcy

First, remember that personal bankruptcy is a solution to indebtedness that allows you to free yourself of debt and start over at zero. For more information about all the steps involved and its consequences, consult the section of our website on this topic.

Can I keep my car if I declare bankruptcy?

It all depends on your situation.

1.

You have a car loan or you are leasing your vehicle.

You can keep your vehicle under certain conditions :

You are leasing your vehicle, but you are able to continue making payments ;
You have a car loan that you are not finished paying, but you have the means to continue making payments ;
You have finished paying off your car and you need it for your work (e.g., you are a taxi driver).

On the other hand, you would have to give your car up if :

You can no longer afford your monthly payments ;
Rental return costs are too high for you ;
The value of the leased car is significantly lower than the amount you owe.

This will allow you to quickly be freed of your debt problems. Having a car involves many expenses (insurance, gas, maintenance, etc.) and does leave its mark on a budget. Luckily enough, there are alternatives to buying or leasing a vehicle such as public transportation, biking or carpooling.

2.

You really want to keep your car even though it can be seized

In this case, you can buy it back from the licensed insolvency trustee by paying them an amount equal to the car’s market value.

Can I keep my house if I declare bankruptcy ?

Yes, you can keep it based on its equity.

If there is equity, your house could be seized.
If there is no equity and you are able to pay your mortgage every month, you can keep your house.

Equity corresponds to the difference between the fair market value and the mortgage loan balance. For example, if your house is assessed at $300,000 and your mortgage balance is $200,000, your equity will be : $300,000 – $200,000 = $100,000.

To determine whether your house has equity or not, the best thing is to call on a licensed insolvency trustee. This expert will analyze your financial situation and all of your debts to determine whether your house has equity.

You want to keep your house even though it can be seized ?

You will then have to :

Pay the amount of your equity ;
Ask your spouse to buy you out if this person is not involved in your bankruptcy ;
Establish a payment agreement with your trustee.

In conclusion

Going bankrupt does not necessarily mean you will have to give up your house and car. However, there are solutions other than personal bankruptcy for paying off your debts. The consumer proposal is one of them. Through an agreement with your creditors, it allows you to decrease your monthly payments and keep your car or house. Under a proposal, debtors can keep all their property if they wish.

To find the best solution for you, get advice from a licensed insolvency trustee or a bankruptcy trustee like those at Raymond Chabot. They will guide you throughout the steps of the process.

Are you considering declaring bankruptcy? Contact one of our licensed insolvency trustees. They will help you see things more clearly.