Will I Lose My Home if I Declare an Alberta Bankruptcy?

Posted by: Sandy Lyons on 11/04/2011

If you are in severe financial trouble, whatever solution you adopt is going to involve sacrifice.  An Alberta bankruptcy is not the only debt solution alternative that causes some personal pain.

If you elect to try to get through your difficulties on your own, you will have to cut back on your expenses significantly.  For many Albertans, this leads to severe reductions in their standard of living.   Even those debt settlement plans and credit counseling solutions you hear advertised require sacrificing your credit rating.

Filing an Alberta bankruptcy eliminates unsecured debt more quickly than any other alternative, but it comes with a price tag that is too high for many Albertans to pay.  If you have looked into what is involved in a declaration of personal bankruptcy, you know the price for shedding your debt is possible asset loss.  The bankruptcy laws try to be fair to creditors, so if you own more assets than the Provincial government feels are necessary for living without undue hardship, you are going to lose some of them.  The asset that worries Albertans the most is their home.

Those of you who have already searched the Internet for information know that Alberta has a personal exemption allowance for equity in your principal residence of $40,000.  You also know you determine the equity by subtracting the current value of your home from the remaining mortgage balance.

You may not know a realtor’s comparative market analysis does not provide an acceptable figure for your home’s value.  For that, you need a professional appraisal.  In addition, you may not know there are some mortgage loans that contain a clause allowing a lender to foreclose on a home in the event the borrower files for bankruptcy, even if payments are up to date.

In practice, lenders rarely exercise this option as foreclosing on a home and turning around and selling it is a costly process.  The point of all this is to show you the complexities involved in assessing whether or not your home is at risk if you declare an Alberta bankruptcy.

What’s more, depending on your financial circumstances, you may actually be better off surrendering the home and getting a fresh start rather than struggling on in a debt settlement plan that may last for years.

Getting out of debt is not a “do it yourself” project.  People in moderate trouble may be able to develop a budget to cut expenses and get back on track.  If you are in more serious trouble, you need professional help.  Even those in moderate trouble could benefit from some objective, professional advice.