Ten years ago they bought a house. Like many newly married couples they used their credit cards to furnish the house, and to buy things for their growing family. Five years ago they owed $30,000 on their credit cards.

Fortunately for them, their house had increased in value, so they were able to refinance their mortgage, borrow an additional $30,000, and pay off their credit cards.

Unfortunately they continued to spend more than they were earning, and ended up with more credit card debt. Fortunately for them, two years ago their house had continued to increase in value, and they were able to refinance once again, and pay off their credit cards.

They were using their house as though it was an ATM machine, dispensing cash when they needed.

When I first met with them a few months ago, they were somewhat depressed. Over the last year their hours at work were cut back, and they were again using credit cards to survive. They approached their bank, again, and were shocked to learn that they could not borrow any more money against their house. Over the last few months their house had actually declined in value, and with their reduced incomes the bank would not lend them any more money.

What could they do? I suggested a number of options.

First, they could sell their house and rent. Their was still a small amount of equity in their house, and they could use that money to pay down some of their debt. They decided that it was best for their family to remain in their neighbourhood, and renting would cost almost as much as owning, and selling the house would not generate enough money to repay all of their debts, so they decided against selling.

Since we already knew they could not refinance, and since they did not want to go bankrupt, we decided that a consumer proposal was the correct option.

We worked out a budget so that we knew what they could afford to pay each month. We ended up filing a consumer proposal where they will be paying $400 per month for the next five years (although they can pay it off faster with no penalties if they want to). In total they will be paying $24,000, even though their total debts (not including the mortgage) were almost $50,000.

Their creditors are happy, because they know that in a bankruptcy they would only get about $10,000 from the house, and this couple is happy because they know they can afford one monthly payment of $400, and they can keep their house.

I am seeing an increasing number of people in Cambridge who have used the equity in their house to help with their debts in the past; as that becomes more difficult, a consumer proposal may be the answer. If you think a consumer proposal may work for you, please call my office in Cambridge at 519-622-3773, or e-mail me to set up a free initial consultation, and I’ll help you work out a solution that’s right for you.

One of the most common topics I have discussed with people in my Cambridge bankruptcy office over the last few months (and years) is real estate in Cambridge, Ontario.

The real estate market has dropped, in some cases significantly, during the first half of 2008, and the real estate agents I talk to believe it will continue to decline over the balance of 2008. There are many reasons for this, including an over-heated market, and the fact that the price of gas is a lot higher than it was in 2007, so many people who live in Cambridge but work in Mississauga or Toronto have decided to sell their homes in Cambridge to move closer to where they work, which depresses prices.

What happens if you own a house and have more debt than you can handle? You have a number of options.

First, you can sell your house. If you have equity in your house (equity is the money left over when you sell your house and pay the real estate commissions, legal fees, and repay your mortgage) you can use that equity to repay your other debts, such as credit cards. Of course by selling your house you must now find a place to rent, so it’s a big financial decision.

When discussing real estate, the most common question I am asked is Will I lose my house if I file for bankruptcy in Cambridge? The answer depends on the value of your house, and a number of other factors.

Second, i t is possible to keep your house, even if you have financial problems. For many, a consumer proposals in Cambridge is a bankruptcy alternative. In a consumer proposal, we make a deal with your creditors, based on the equity in your house, and your ability to make a monthly payment. I would be happy to meet with you to explain this further.

Here’s how I advise people to make their decision:

If you have equity in your house, but a lot of other debts, you should consider selling your house now and using the money to repay your debts. Even if you only have $25,000 in equity in your house and $50,000 in debts, we could do a lump sum consumer proposal where we offer the creditors the proceeds from the sale of your house, and in return they forgive the balance of your debts. If house prices continue to decline, selling your house now may be the most logical decision.

Of course selling the family home is a very difficult decision. If you like your area, and if your children are established with their friends and in school, moving is very difficult. However, it may be possible to find a place to rent in your area, so your children can continue going to the same school, and still see all of their friends.

You have to ask yourself this question: Would my family and I be better off renting with a lot less debt, or should we stay in our house and keep paying the mortgage, property taxes, utilities, upkeep, and all of our other debts?

No-one wants to sell their house, but in some cases it’s the best financial decision.

Either way, this is a very difficult and emotional decision. Over the years I have helped hundreds of Cambridge residents analyze their options. I won’t tell you what to do. Only you can make the decision about your future. But I will help you understand all of the options, and understand the implications of your decision.

I won’t judge you; I’ll just help you.

For your free initial consultation, or if you just want to talk on the phone, please call my Cambridge office at 519-622-3773 or 310-PLAN, or e-mail me a question and my staff will set up a meeting so that I can personally review your situation, and help you decide on the best option for dealing with your house, and all of your debts.

If you go bankrupt in Cambridge, as your trustee I am required to recover the equity in your house. For example, if your house is worth $200,000, and your mortgage is $150,000, then your house has equity of $50,000. (If your house was to be sold there would be real estate commissions and other expenses, so in an actual bankruptcy this calculation would be more complicated). If you were to go bankrupt, you would be required to either pay $50,000 to the trustee (to be distributed to your creditors), or you would be required to surrender your house.

Of course if you have a house with no equity, then you would not lose it if you went bankrupt, provided you kept making your mortgage payments.

If your house has equity, but not enough equity to qualify for a debt consolidation loan, you could consider selling the house, or you could consider a consumer proposal as a strategy to deal with your creditors without losing your house.

If you own a house in Cambridge and you have financial problems, you need expert assistance, so e-mail me or call my office at 519-622-3772 to arrange a free consultation so we can review your house situation in more detail.