Foreclosure, Bankruptcy, And Credit Counselling
Saskatchewan has been reported to have the highest mortgage delinquency out of all Canadian provinces, according to the latest Canadian Bankers Association report. The national average of homeowners unable to pay their mortgage is 0.24%. However, Saskatchewan is more than triple that at .80%, with Alberta being next place at .46%. At first glance, these numbers may seem insignificant. However, that is until you realize that “delinquency” in this report is defined as homeowners who are at least 3 months behind in their payment.
It’s important to realize the ramifications of overdue mortgage payments, which may ultimately lead to foreclosure and bankruptcy. So let’s talk about it; what are each of these, and how can you best avoid them?
Foreclosure occurs when the loan borrower has become too behind on their payments, so much so that the bank is forced to take back their initial collateral, which is the property in the case of a home buyer. This may come as a surprise to some, but the bank does not want to do this. Non-payment of a mortgage over an extended period of time forces them to this last resort. The process of foreclosure is different for every province.
As mentioned previously, Saskatchewan has the highest home owner delinquency in Canada, and with reason. Banks in Saskatchewan must undergo the most difficult process for foreclosure in Canada, while loan borrowers have many chances to catch up on payments and restore ownership of their homes. This process can takes months to work through for the bank to take ownership of the property then to auction it for their money back. With that being said, the long-term effect on a loan borrower that goes through foreclosure is permanent. The credit report of a foreclosure borrower will be permanently marked. Unlike a bankruptcy or consumer proposal that are eventually removed, the foreclosure stays on their credit report for life. When they want to eventually purchase a home again, they will likely be required to pay a down payment of 20% of higher.
Bankruptcy & Consumer Proposal
Both bankruptcy and consumer proposal are administered through a licensed insolvency trustee. All parties that you are indebted with will participate in this process. This includes official bodies such as the Canada Revenue Agency and Student Loans.
If you have gone through either of these insolvency actions, the mortgage industry sees them as them as the same thing. However, both of these are better than foreclosure, as they expire on your record eventually. Banks and mortgage lenders will want to see someone who had previously declared bankruptcy to prove their ability to deal with small amounts of credit before granting a large sum again. Once discharged from either of these, attempting to obtain a credit card should be your first step. You may be required to send documents related to the insolvency. It is a good idea to keep all your paper work from this process in a safe place for at least 10 years.
If you are keeping up well with your debt payments but want to seek solutions on how to get out of your debt plan faster, credit counselling is the viable solution for you. However, for those who have fallen behind on their debts more have gone into collection status, credit counselling may not be the answer. There are 2 distinct differences between working with a credit counsellor and a licensed insolvency trustee.
- Student loans and debts to Canada Revenue Agency cannot be addressed within credit counselling
- Creditors may decline to participate if the credit counselling requires debt negotiations and/or payment arrangements
This leaves portions of debt outside the possibility of credit counselling arrangement; people in this situation may have to address it on their own.