It may not be necessary to lose all or any of the equity in your home to a trustee!
Keeping Your Home
How is the Equity in my House Calculated?
Keeping Your Home
You may be able to keep your house if you can come up with enough money to cover your equity, which is the difference between what the house is worth and what you owe on it. It may not cost as much as you think. A rough guide to your home’s equity is the current market value of your home, less the mortgage(s), real estate fees, legal fees, mortgage(s) penalties, any back property taxes and utilities due.
When deciding if you can keep your house, you should know that when you file a Bankruptcy or Consumer Proposal you are then no longer required to make any payments towards any unsecured debts and therefore you may actually have more money available to pay your mortgage, property taxes and utilities.
Prepare a quick budget to confirm for yourself whether or not this will apply to you.
How is the Equity in my House Calculated?
The following example will demonstrate how a bankruptcy trustee may determine if you have any equity in your home.
A real estate agent appraises your home at $200,000 and provides a Letter of Opinion to confirm this value. You owe the mortgage company $150,000. That means we start off with $50,000 in equity.
The final amount of equity in this house that a bankruptcy trustee would consider as “available equity” should then be calculated as follows:
| Fair market value as determined above | $200,000 |
|---|---|
| Less: First mortgage | -150,000 |
| Less: Real Estate Commission at 6% | -12,000 |
| Legal fees estimated at 1.5% | -3,000 |
| Mortgage penalty of 1.5% | -3,000 |
| Miscellaneous arrears at 1% | -2,000 |
| NET Equity in the home: | $30,000 |
In this particular example, if you paid the trustee $30,000 before your bankruptcy was completed, you would keep your home after the bankruptcy.
In the above example you can see how important it is to get a fair and accurate Letter of Opinion on the value of the property. At Genesis Associates Ltd. we have a proven method of evaluation that will assist you in your presentation to the trustee. Keep in mind that Bankruptcy Trustees are NOT Real Estate Brokers or Agents, therefore they do not really (in our opinion) want to go through the sales process of your home in order to satisfy their responsibility to your creditors.
Consider now the same example above, but with the property Letter of Opinion valuation being $170,000 (in a distress sale under Bankruptcy) instead of $200,000. After deducting the same 10% in expenses you will have the following:
| Fair market value as determined above | $170,000 |
|---|---|
| Less: First Mortgage | -150,000 |
| Less: Real Estate Commission @ 6% | -10,200 |
| Legal fees estimated at 1.5% | -2,550 |
| Mortgage penalty of 1.5% | -2,550 |
| Miscellaneous arrears at 1% | -1,700 |
| NET Equity in the home: | $ 3,000 |
Quite a difference, and all based on how the Letter of Opinion is evaluated and presented.
We can help you save the equity in your home, and ultimately pay LESS through the course of your Bankruptcy of Consumer Proposal. Although we cannot give specific information as we are bound under the Privacy Act, suffice it to say we have NOT lost a property yet to a trustee in facilitating this assistance to our clients since July 2003.
We are available to help.
You have nothing to lose other than the time it takes to call us to discuss. We will arrange a meeting with a trustee, and attend the meeting with you.
There are NO up front fees.
The initial meeting is for information purposes.