Yes, you can choose to keep making payments on your car or mortgage if you file for bankruptcy.

Generally speaking, mortgage or vehicle financing lenders hold an asset as collateral (ie. your home, in a mortgage). This means that they are “secured creditors” and are treated a bit differently in bankruptcy than other creditors (ie. credit card debt, which is unsecured).

The start of a bankruptcy can be a good time to evaluate whether you want to continue with a vehicle lease, loan or mortgage. Most people use bankruptcy as a way to get rid of debt that is unsecured and want to maintain their obligations with their preexisting mortgage or vehicle loan. If you file bankruptcy you have a choice on how you deal with your car loan and/or mortgage:

  • You can decide to continue with the payments to secured creditors in order to keep the asset pledged as collateral. (In simple terms, if you want to keep the house or car and there is a mortgage or a loan against the asset, the mortgage or loan needs to continue to be paid.); or
  • If you want to include both unsecured and secured debt in your bankruptcy, you also have the option of surrendering the asset to the secured creditor, which ends any ongoing payment obligation. If there is a shortfall (difference between what you owe and what the asset is re-sold for) this can also be absorbed by the bankruptcy.

Some lenders will require you to give them a general security (lien) over assets like your household furniture – these types of secured debts can also be dealt with under a bankruptcy.

Watch our short video about how Consumer Proposals in BC impact mortgages and vehicle loans, the same applies in personal bankruptcy.