In Arrears? Don’t Ignore a Statement of Claim
If you are unable to keep up with mortgage payments, you may lose possession of that property. Foreclosure is the legal process by which a lender secures repayment of a loan from a borrower who has stopped paying the monthly installments toward that loan.
What Is a Demand Letter?
In Alberta, the foreclosure process begins with a demand letter, informing you that foreclosure proceedings have begun. If you can make up the payments you have missed, you must do so on receipt of this letter. You will also be liable (by the mortgage agreement you originally signed) to pay the lender’s lawyer’s fees.
What Is a Statement of Claim?
If you are unable to make up the payments you missed plus the lender’s lawyer’s fees, and you ignore the demand letter, a statement of claim will be issued to initiate the lawsuit. You have 14 days to respond to the statement of claim. If you don’t respond, you will be considered in default and the lender can continue with the foreclosure without any further communication to you.
What Can You Do if You Receive a Statement of Claim?
Don’t ignore it, since you will be noted in default if you do and foreclosure can happen very quickly without any further notice. Don’t avoid being served with the statement of claim since the costs of hiring a process server to locate you and serve you with the statement of claim will be tacked on to what you already owe.
Here are some options on how to respond to a statement of claim:
The very least you can do is file a demand of notice. If you assess your financial situation and know that you cannot make up missed payments, filing the demand of notice with the court will at least ensure that the lender’s lawyer notifies you of any actions taken toward the foreclosure in court. It also gives you the opportunity to make sure that the amount you are claimed to owe is correct and review any additional costs that are being added, such as the bank’s collection costs.
You may wish to file a statement of defence if you are completely certain that you are being sued in error or if the amount of the claim is vastly inaccurate. Keep in mind that your own costs for legal representation and the lender’s costs to continue the suit will both be increased and you will be liable for both if the court decides against you.
Negotiating a consent order for foreclosure is an option if you have built substantial equity in your home but cannot make up missed payments. You must engage a lawyer for this negotiation that will extend the period of the foreclosure, allowing you to live in your home a little longer, and perhaps find a buyer for the property instead of going through a court-ordered auction.
A more drastic option is to negotiate a quit claim by which you give the title to your property to the lender, move out of the property and give up any equity you may have built up in the property. You will need a lawyer to help you through this process.