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Jan 04, 2017

Mortgage Payments AFTER Bankruptcy - to pay or not to pay??

You own a home. You have a mortgage. You go bankrupt. Your mortgage company continues to accept your monthly mortgage payments throughout your bankruptcy and after your discharge. You stay in your home.

But what happens if you default under your mortgage after you have been discharged from bankruptcy? Can your mortgage company sue you for amounts owing under your mortgage? Or does your discharge from bankruptcy extinguish the mortgage debt?

That was the question that Nova Scotia judge (Mr. Justice Moir) was asked to decide. This judge held that bankruptcy trumps the continuation of the mortgage payments - and that the homeowner/mortgagor cannot be sued (after bankruptcy) for payment of his or her pre-bankruptcy mortgage debt.

According to this case, your mortgage company could have taken steps - once you filed for bankruptcy - to have you sign a brand new mortgage agreement that would have resulted in you being liable for future defaults under the mortgage. But if your mortgage company chooses not to have you sign new paperwork when you go bankrupt, then your filing for bankruptcy stops your mortgage lender from suing you for amounts owing under your mortgage; at least in Nova Scotia.