Can I surrender my home without major damage to my credit?

| Category: Bankruptcy in Ontario
Category: Bankruptcy in Ontario

Question: I am no longer able to keep up with costs of maintaining my home. I am one month behind on a mortgage payment. Can I surrender my home to the mortgage company without claiming bankruptcy in Ontario and/or damaging (further) my credit rating that the mortgage arrears have already done?

bankruptcy and mortgage arrearsAnswer: The answer depends on the value of your home. If you surrender the house to the mortgage company and stop making the mortgage payments, the mortgage company will eventually foreclose on your home and sell it. If they get enough money to completely pay off the mortgage and associated costs, you won’t owe them any money, so there won’t be any long term damage to your credit rating.

However, if there is a shortfall on the mortgage when the house sells, your credit rating may be negatively impacted if you are not able to pay the shortfall.

If you believe you will lose your house, it is often better, if possible, to sell it yourself to maximize the proceeds. If there is a shortfall that you can’t pay, declaring personal bankruptcy or a considering consumer proposal may be options to deal with the debt.

If you are in arrears on your mortgage, consider talking to an Ontario bankruptcy trustee about your options. You may be able to keep your house if the reason for your arrears is because you are also balancing other significant debt payments.