Will I lose my house because of my money problems?

by J. Douglas Hoyes

Douglas Hoyes

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 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.

About

Douglas Hoyes is the co-founder of Hoyes, Michalos & Associates Inc., Ontario's largest independent personal insolvency firm, and the trustee responsible for the Hoyes Michalos Cambridge office.

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