Foreclosure vs Mortgage Bankruptcy

Learn how foreclosure works, how it’s different from bankruptcy, and how to avoid it.
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  3. Foreclosure vs Mortgage Bankruptcy in Canada

Foreclosure vs Mortgage Bankruptcy in Canada

There are differences between how mortgage foreclosure works in the bankruptcy process in Canada versus the States. In Canada, going bankrupt doesn’t mean that you lose your house or end up in foreclosure. Bankruptcy also doesn’t stop the foreclosure process because a mortgage is a secured debt. Bankruptcy deals with unsecured debts.

Close up of foreclosure notice document, keys and judge gavel on a table

Mortgage Foreclosure
Pay Your Mortgage to Avoid Your Lender Selling Your Home to Get Money Back

Foreclosure is what happens when you can’t pay your mortgage and the lender takes over owning your home. The lender then sells your home to pay off what you owe them. You have no control over how the home is sold and will be given notice to leave the property, sometimes even before it’s sold. It depends on the circumstances as to when you have to leave.  

Depending on the outcome of the sale and your overall situation, you may be required to pay any amount that’s short if the home is sold for less than what you owe. That means you could lose your home, but still have to pay more to deal with your debts.

Avoid Bankruptcy Foreclosure
Pay Monthly Bills for Secured Debts Like Mortgages

Bankruptcy eliminates your unsecured debts, so a debt like your mortgage, which is a secured debt, isn’t included in your bankruptcy in Canada.

If you’re having problems paying your mortgage, after you miss 2 payments your lender will start contacting you and requesting that you catch up on those missed payments immediately.

If you miss a third payment or are unable to catch up and stay caught up, the lender will start the foreclosure process.

 

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Young guy sitting on his desk and looking at his laptop

Common Questions About Bankruptcy Foreclosure

A common question about foreclosure vs mortgage bankruptcy is how the process works. Many people wonder if they’ll lose their home or not, what rights their mortgage lender has, or if getting a loan will help them. Some of your questions might be answered in the information above.

In Canada, when you declare bankruptcy, your mortgage isn’t automatically in foreclosure. Your mortgage is a secured debt, so it isn’t included in your bankruptcy. The rules in each province are a little different, so your trustee will explain what happens to your home and your mortgage if you declare bankruptcy, and how declaring bankruptcy can affect foreclosure.

Mortgage Foreclosure
Process and Timeline – Save Funds and Prepare to Move on Short Notice

The foreclosure process usually takes a timeline of about 6 – 10 months to complete. During this time, you will likely not make any further mortgage payments. While it might be possible to stop your home from being foreclosed, it will mean catching up all arrears and fees. We can help you look over your budget and finances before you talk to your lender if this is your situation.

You are usually able to remain living in the home while it is up for sale. If you do choose to stay in the home during this time, save funds towards a rental deposit elsewhere and prepare to move on short notice. 

 

 

Anxious couple sitting on their couch reading their bills at home in living room

Bankruptcy Mortgage and Foreclosure – Contact Us for Help About What to Do

If you’re having trouble paying your mortgage and are worried that you might be facing foreclosure, contact us for help right away. You will have more options available to you if you ask for help sooner rather than later. Sometimes, once you deal with your debts and other bills, you can catch up, resume regular mortgage payments and stay in your home. You can get more information about bankruptcy and avoiding mortgage foreclosure by calling us at 1-888-527-8999, emailing us, or chatting with us online now.

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