# Mortgage Foreclosure / Statement of Claim



## OntFA (May 19, 2009)

Looking for some help or guidance here folks. I am helping the relative of a client - "borrower". The borrower was served with a statement of claim because they're 5 months behind (i.e. no payments) on their mortgage. First time offenders but they have also claimed bankruptcy recently. Upon the borrower's request, the bank also sent a statement of arrears.

The borrower has just resumed full time employment and I'm helping to draft a response and connect with others who may help. My questions:

1. Does anybody know if the borrower can send a single response to both the statement of claim and the statement of arrears? The borrower doesn't intend to file a statement of defense because she doesn't deny that she owes the money; just stopped paying because of loss of job. But having gone through their financials post-bankruptcy and new income source they should be able to make up arrears and resume normal payments.

2. I told the borrower that anything that could be done to demonstrate an increased willingness and capacity to make payments will encourage the bank to work with her. That's just my logic. Does that hold up based on your experience?

Any help appreciated. Also connecting borrower to legal aid but hasn't happened yet so looking for any guidance you folks can provide


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## marina628 (Dec 14, 2010)

Is she already discharged?Why not include house in bankruptcy ?In 1997 my old neighbor lost her house , she offered a partial payment to the law office who had the deal and they would not accept anything than full payment .I am not sure how legal aid plays into this ...


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## OntFA (May 19, 2009)

marina628 said:


> Is she already discharged?Why not include house in bankruptcy ?In 1997 my old neighbor lost her house , she offered a partial payment to the law office who had the deal and they would not accept anything than full payment .I am not sure how legal aid plays into this ...


I admit to being out of my comfort zone and expertise. But just trying to do what I can to help (as a favour to a good client). I think the house was not included in the bankruptcy because the bank is a secured creditor while the bankruptcy, I believe involved unsecured creditors.

My reference to legal aid was in response to the bank filing a statement of claim. Some form of legal advice seems appropriate but they can't afford a lawyer. I think because of how long the mortgage has been in default and the recent bankruptcy, there is less flexibility in terms of partial vs full payment and the time given to get things back onside.


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## marina628 (Dec 14, 2010)

my friend could not get legal aid to fight a custody case when she was claiming abuse so I doubt they will help in this situation.In my opinion if they do not have a few hundred to pay a lawyer to look at the docs how are they planning to come up with arrears?They probably had no equity in the house and agreed to pay the mortgage to keep the house ,you can definitely claim bankruptcy on a mortgage and it makes sense to me if they were in arrears they should have when they filed.


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## iherald (Apr 18, 2009)

OntFA said:


> 1. Does anybody know if the borrower can send a single response to both the statement of claim and the statement of arrears? The borrower doesn't intend to file a statement of defense because she doesn't deny that she owes the money; just stopped paying because of loss of job. But having gone through their financials post-bankruptcy and new income source they should be able to make up arrears and resume normal payments.


I'm not a specialist in this field, but in general a statement of defence is filed with the court, and I don't think that a statement of arrears is. So I would think that you need to do both separately.


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## dagman1 (Mar 3, 2010)

No kidding you are outside your comfort zone.

A statement of claim is a court document that initiates a lawsuit. You'll have a certain number of days to respond to the statement of claim with a statement of defence, otherwise you'll be noted in default. A statement of arrears should just be a summary by the bank of how much money they owe, not a legal document.

If they have the money to pay the arrears, why don't you just contact the lawyer who initiated the statement of claim to tell him the arrears will be paid in full? Then he will just withdraw the statement of claim.

Otherwise, they will need a lawyer, because the house will likely be sold.


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## OntFA (May 19, 2009)

dagman1 said:


> No kidding you are outside your comfort zone.
> 
> A statement of claim is a court document that initiates a lawsuit. You'll have a certain number of days to respond to the statement of claim with a statement of defence, otherwise you'll be noted in default. A statement of arrears should just be a summary by the bank of how much money they owe, not a legal document.


Yes, I know. I spoke to a lawyer friend who said that a statement of defense is not necessary if there is no dispute about the amount owed. The borrowers should speak to a lawyer, which I arranged for them, simply to understand their rights and obligations.



dagman1 said:


> If they have the money to pay the arrears, why don't you just contact the lawyer who initiated the statement of claim to tell him the arrears will be paid in full? Then he will just withdraw the statement of claim.


Well, it's not readily available but there are assets that can be sold. That plus existing cash can cover the arrears. The borrower submitted a response indicating both an ability and willingness to bring the mortgage back onside. I expect that the statement of claim will be withdrawn (which the lawyer also expects).

Thanks to those who responded. It's been a learning experience since this is not something I've dealt with formally with clients or any other acquaintance.


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## marina628 (Dec 14, 2010)

Sometimes it is good for people to let go of the asset if it means they will continue to be house poor.Is there any equity in the house that makes it worth saving?


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## OntFA (May 19, 2009)

marina628 said:


> Sometimes it is good for people to let go of the asset if it means they will continue to be house poor.Is there any equity in the house that makes it worth saving?


No. My best guess is that the mortgage is under water, which is why there is a strong chance that the bank will accept the borrower's response/repayment plan and withdraw the statement of claim.

But to my knowledge, Canada is not the U.S. re: mortgage law. If the house proceeds are insufficient to pay the mortgage (foreclosure sales usually prioritize speed, not proceeds maximization) the borrower can still be pursued if I'm not mistaken. And their credit rating is so destroyed they couldn't pass any landlord's credit check - which most use as a preliminary screen - so it's not clear that they would be able to even find a rental.

The non-financial benefits of saving the house include the satisfaction of being able to get back on your feet on your own without trying to stiff the bank. Also, if this family had to leave their home to move who knows where would hugely damage their family's morale. Like with most people, this is more than a house; it's a home.

It will be good for them to feel the pain of having to sell some assets they don't really need and which helped them get into this mess. That may also be one of many factors needed to keep them on track. Their payments are no different than what they'd pay for rent. And the house is new enough, any major expenses - i.e. windows, roof, furnace - are likely several years away.


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## marina628 (Dec 14, 2010)

I still can't shake the fact they RECENTLY declared bankputcy ,It makes me wonder if they did a full disclosure of the situation to the trustee.Also they just recently resume work , what happens if in 6 weeks they are out of work?they will be in same situation again .Also you are correct if house is sold and they are underwater the bank will go after them which is why i don't know why this was not in the bankruptcy in first place.They declared bankruptcy so stiffing the bank is no different than the people they already stiffed  
I just can't understand how a mortgage 5 months in arrears is not included in a bankruptcy claim.Anyway let us know how it works out


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