Do You Lose Your House in Bankruptcy in Canada?

Does bankruptcy mean you lose your house?

No. Filing for bankruptcy in Canada does not mean you automatically lose your home.

There are provincial exemption laws that protect a set amount of home equity from your creditors.

Here are three possible scenarios:

• If your equity is below your province’s exemption limit, you keep the house.
• If your equity exceeds the exemption, you pay the difference to your Licensed Insolvency Trustee or the home is sold.
• If you have negative equity, the trustee has no interest in the home at all.

Your mortgage lender cannot accelerate your mortgage, change your interest rate, or terminate the agreement just because you filed for bankruptcy.

Source: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 84.2(1)

How is home equity calculated in a bankruptcy?

Your Licensed Insolvency Trustee calculates net equity by taking the home’s current market value and subtracting the mortgage balance, any property taxes owed, and estimated selling costs such as real estate commissions and legal fees.

For example, a home appraised at $500,000 with a $460,000 mortgage and $15,000 in selling costs has $25,000 in net equity. That figure is compared to your province’s exemption threshold to determine how much equity you keep.

What are the home equity exemption limits by province?

Provincial exemption amounts vary, and they directly affect whether bankruptcy costs you your home.

Province	Home equity exemption	Notes
Ontario	$12,997	All-or-nothing. If equity exceeds the limit, the full amount is available to creditors.
Alberta	$40,000	Pro-rated if co-owned.
Saskatchewan	$50,000 per person on title	$100,000 combined for joint owners. Highest in Canada.
British Columbia	$12,000 (Greater Vancouver and Capital Regional District) / $9,000 (rest of province)	Low relative to BC property values.
Manitoba	$2,500	Among the lowest in Canada.
Quebec	No traditional exemption	Principal residence protected only when total claim is under $20,000.
NB, NS, PEI, NL	No specific home equity exemption	Local rules apply.

How does Ontario’s home equity exemption work?

Ontario’s home equity exemption is $12,997 as of December 2025. But Ontario’s rule works differently from most other provinces, and this catches many homeowners off guard.

Ontario uses an all-or-nothing approach. If your net equity is at or below $12,997, the home is fully exempt. Your trustee cannot touch it.

If your equity exceeds $12,997 by even one dollar, the entire equity is available to creditors. The full amount, not the excess.

Source: Ontario – Execution Act

How do other provinces compare?

Alberta protects $40,000 in home equity under the Civil Enforcement Act. If you co-own the home, the exemption is based on your percentage of ownership. Alberta is one of the more generous provinces.

Saskatchewan has the highest home equity exemption in the country at $50,000 per person on title. A couple who jointly own a home gets $100,000 in combined protection under the Enforcement of Money Judgments Act.

British Columbia’s exemption is $12,000 if your home is in Greater Vancouver or the Capital Regional District, and $9,000 everywhere else in the province. Given BC property values, those numbers leave most homeowners exposed. The Court Order Enforcement Act sets these limits.

Manitoba protects just $2,500 in home equity under the Executions Act. That’s among the lowest in the country.

Quebec does not have a traditional home equity exemption. Your principal residence is protected from seizure only when the total claim against you is less than $20,000 under the Code of Civil Procedure, Article 694.

New Brunswick, Nova Scotia, PEI, and Newfoundland and Labrador have no specific home equity exemption. Your Licensed Insolvency Trustee can explain how local rules apply to your property.

What happens if your equity exceeds the exemption?

If your home equity exceeds the provincial exemption, you have two paths.

First, you can buy back the non-exempt equity by paying your Licensed Insolvency Trustee the difference. Some people fund this with help from family, a second mortgage, or a payment arrangement negotiated with the trustee.

Second, the trustee can sell the home and distribute the non-exempt equity to creditors. You receive the exempt portion of the proceeds back. Either way, you must also stay current on your mortgage payments.

If you cannot afford the buyback and don’t want to lose the home, a consumer proposal protects all your assets, including your home, regardless of how much equity you have. The equity affects the size of your offer to creditors, not whether you keep the house.

Can your mortgage lender foreclose because you filed for bankruptcy?

No. The Bankruptcy and Insolvency Act prevents any person from terminating, amending, or claiming accelerated payment under an agreement with a bankrupt individual solely because of the bankruptcy. That includes your mortgage lender.

They cannot call your mortgage, raise your interest rate, or change the terms just because you filed.

If you were already behind on mortgage payments before filing, the lender can still initiate or continue power of sale proceedings (in Ontario and the Atlantic provinces) or foreclosure proceedings (in the western provinces). Bankruptcy does not resolve mortgage arrears.

Your mortgage is a secured debt. It is not included in the bankruptcy unless you choose to surrender the home.

As long as you keep making your payments, the mortgage carries on as if the bankruptcy doesn’t exist.

Source: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 84.2(1)

What if your home has negative equity?

Negative equity means you owe more on your mortgage than the home is worth.

In this scenario, your Licensed Insolvency Trustee has no interest in the property because there is nothing to recover for creditors. The home is not an asset worth pursuing.

You have two choices. You can keep the home and continue making mortgage payments, or you can surrender it.

If you surrender, the lender sells the home, and any shortfall between the sale price and your mortgage balance becomes unsecured debt. That unsecured shortfall is discharged in the bankruptcy.

Negative equity can occur if the property value drops or if homeowners refinanced heavily when values were higher. It is also common with newer mortgages that have paid down little principal.

How does a consumer proposal protect your house?

A consumer proposal protects all your assets, including your home, no matter how much equity you have.

You make an offer to your creditors that must exceed what they would receive if you filed for bankruptcy.

Your creditors vote on the offer. If they accept, you repay that amount for up to five years and keep everything.

The equity in your home affects the size of the offer, not whether you keep the house. Your mortgage payments continue as normal. For homeowners with greater equity, a consumer proposal is an attractive alternative to bankruptcy.

Read more: Can I Keep My House in a Consumer Proposal?

Frequently asked questions

Does my mortgage lender get notified when I file for bankruptcy?

Your Licensed Insolvency Trustee notifies all creditors listed in your filing.

Your mortgage is a secured debt and is not included in the bankruptcy unless you choose to surrender the home. Your lender cannot change your mortgage terms or call the loan solely because you filed.

Can I sell my house during bankruptcy?

You cannot sell your home without your Licensed Insolvency Trustee’s approval during bankruptcy because the property vests with the trustee.

If a sale makes financial sense, the trustee manages the process and distributes the proceeds in accordance with creditor priority.

What happens to a jointly owned home if only one spouse files for bankruptcy?

The trustee’s claim is limited to the bankrupt spouse’s share of the equity. If the home is held as joint tenants, the trustee is typically entitled to 50% of the equity. The non-filing spouse’s share is protected.

Does the home equity exemption apply to a rental property or cottage?

No. Provincial home equity exemptions apply only to your principal residence. Investment properties, rental properties, and vacation homes are non-exempt assets. The full equity in those properties is available to creditors in a bankruptcy.

Is a consumer proposal better than bankruptcy if I own a home?

For most homeowners with equity above the provincial exemptions, a consumer proposal is the safer route. It protects your home without requiring you to buy back equity. A Licensed Insolvency Trustee can compare both options.

Find out if you can keep your house

If you’re worried about your home and considering bankruptcy, book a free consultation with a Licensed Insolvency Trustee. The initial consultation is free and confidential.