Real Estate Financing Solutions for Borrowers in Bankruptcy, With Trustee Consent
At Assadi Private Capital, we provide real estate-secured loans in situations where the borrower is currently in an active bankruptcy, provided that the transaction is legally permitted and the trustee has consented to the arrangement. These are highly specialized files and are only considered in collaboration with licensed mortgage brokers, insolvency professionals, or legal representatives who can confirm compliance with insolvency law and provide clarity on disbursement structure.
We are one of the few direct private lenders in Canada that will assess these types of files, and we do so cautiously and with full regulatory awareness.
What Is a Mortgage in Bankruptcy?
A mortgage in bankruptcy is a private loan secured by real estate, made while the borrower is still subject to an active bankruptcy proceeding. The loan is typically used to:
• Retain ownership of real estate that would otherwise be liquidated
• Buy out other family members or co-owners during a family law matter
• Pay a lump sum to creditors to exit bankruptcy more quickly
• Resolve CRA or tax debts that are delaying discharge
• Settle specific liabilities through trustee-directed repayment
In all cases, trustee consent or court approval is required, and funds must be disbursed in accordance with bankruptcy law.
Why These Deals Exist
Canadian banks and “B” lenders will not lend to undischarged bankrupt individuals under any circumstance. However, real estate ownership does not disappear during bankruptcy. In some cases, the borrower may have sufficient equity to support a secured loan, particularly if:
• The property is jointly owned with a non-bankrupt party
• The trustee is willing to release the asset for a fair value
• A lump-sum settlement will satisfy remaining debts
When structured properly, a private mortgage can facilitate a resolution that works for the borrower, the trustee, and the creditors.
Key Parameters and Conditions
• Loan Amounts: $50,000 to $250,000 (higher case-by-case)
• Security: 1st or 2nd mortgage on real estate in Canada
• Maximum LTV: Typically 65% or less, depending on exit plan
• Term: 6–12 months, interest-only
• Purpose: Must support settlement, property retention, or trustee-approved debt repayment
• Legal Condition: Written consent from trustee (or court order where applicable)
Appraisals must reflect “as is” market value, and title must be reviewed for encumbrances.
Who Submits These Files
We do not deal directly with borrowers.
These transactions must be introduced and managed by a licensed mortgage broker, lawyer, or Licensed Insolvency Trustee. You must be able to confirm:
• Trustee cooperation and legal permissibility
• Structure of fund disbursement (e.g., held in trust, paid directly to trustee, etc.)
• The borrower’s legal capacity to grant a mortgage while bankrupt
We provide responsive guidance and can help structure the transaction for compliance and clarity.
Common Scenarios We Fund
• Family buyout where one spouse is bankrupt but wants to retain ownership of the home
• Estate property subject to bankruptcy, where a co-heir wants to refinance their share
• Business owner in bankruptcy using property equity to satisfy debts
• Trustee-led transaction to raise capital from a property instead of selling it
• Lump-sum offer to creditors to end bankruptcy earlier
Why Professionals Work With Us
At Assadi Private Capital, we understand that bankruptcy is not the end of financial potential. In fact, it can be a necessary legal step toward clarity and solvency. When a borrower owns real estate and all parties involved agree on a path forward, we can provide the short-term capital needed to execute that plan.
We are fast, direct, and solution-oriented, but always compliant. We do not fund deals that lack proper trustee consent, nor do we engage in transactions that circumvent insolvency regulations.
Submit a File or Ask a Question
If you are managing a file where a mortgage during bankruptcy may be appropriate, contact us to discuss.
We issue indicative terms quickly and can fund in as little as a few business days, once legal clearance and documentation are in place.