Question: I have a quetion about selling my home before filling for bankruptcy. My home is currently worth $300000 and my oustanding mortgage is $195000. I have had an offer of $250000 as is and I am considering selling it so I don’t have to worry about forclosure. How would this be seen in the eyes of the Trustee? Am I allowed to sell this low and then file for bankruptcy? Is there any law against selling below fair market value.
Answer: Based on the information you have provided you have $105,000 in home equity. In Alberta you can keep equity of up to $40,000 in a principal residence. If you sell the residence for $50,000 below market the portion available to your creditors will be reduced to $15,000 and it will raise a lot of questions as to why you sold so low and wether you compromised your creditors rights.
It would be better to surrender your house to the bankruptcy Trustee who will sell the house and give you your $40,000. This will eliminate any concerns about what you did or did not do and who was affected by the sale.