Personal Bankruptcy and Consumer Proposal are both remedies that Canadians may use when in financial distress. However, it is important to understand that both of these remedies deal with a borrower’s unsecured debt only. Neither Bankruptcy or Consumer Proposal dismiss a borrower from their obligations under a mortgage loan. This is because a mortgage is a secured loan, securitizing the property as collateral. The only way to discharge a mortgage registered on title is to pay it out from available funds, alternative financing or from the proceeds of the sale of the property.
It is also important to note that a mortgaged property cannot be sold or transferred without discharging the mortgage. That is why all real estate transactions in Ontario require the work of real estate lawyer(s).