Why Can’t I Refinance My House in an Undischarged Bankruptcy or in a Consumer Proposal?

We are frequently asked this question: can I refinance my house after filing for bankruptcy or filing for a consumer proposal?

Often, consumers are told by banks and other financial institutions that they can’t borrow money while in an undischarged bankruptcy or in a consumer proposal. But that’s not the whole story.

In an undischarged bankruptcy, all of your assets are vested in the interest of the trustee, which means the trustee takes possession of the assets until they are realized or declaimed. Assets that typically vest in the trusteeinclude your house, any other real estate you own, any cash or cash deposits you have, and any shares or stock you own.

But even while your assets are vested in the interest of a trustee, you can still borrow money — it is just at the lender’s discretion as to whether they take the risk.

The same is true where a consumer proposal is concerned. A lender can loan you money while you are in a consumer proposal if they want to. In fact, if you are midway through a proposal and your home value has gone up, refinancing to pay off your consumer proposal is a great way to reestablish your credit faster because a proposal comes off of your credit report three years from when it is paid in full.

But again, it depends on the lender — some lenders will be unwilling to take the risk.

If you want to find a lender who will help refinance your house after filing for bankruptcy or filing for a consumer proposal, you have to:

  • Source lenders who promote loans for undischarged bankruptcies and people in consumer proposals. If it isn’t stated on their website, call their office and ask.
  • Expect that while you are in a bankruptcy or consumer proposal a lender will likely want some security collateral like a home or vehicle. Make sure to let the lender know what assets you have.
  • Gather information about your security, value, and what is owed, if anything, so you can have an in-depth conversation with a potential lender.

To sum it up, the answer to the question “can I refinance my house after filing for bankruptcy or filing for a consumer proposal?” is yes, so long as you can find a lender who is willing to work with you.

At Prudent Mortgage Corp., we have lenders who do just that. At Prudent Financial, if you have equity in your home or vehicle, we arrange mortgage financing for people with bad credit, people in undischarged bankruptcies, and people who are filing for a consumer proposal.

Contact us today to learn more about how we can help. Call 1-888-852-7647 or visit www.prudentmortgage.ca.


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