Divorce is hard enough, but now and again unpleasant circumstances become even more complicated. This is frequently the case with foreclosure, which these days is often an uninvited guest during divorce proceedings. But if you’re in the middle of a divorce and facing the prospect of foreclosure, don’t panic!
The good news is you’re not alone; these cases are fairly common and having a good plan can make all the difference. First, there are three important questions to consider: Which spouse is responsible for the mortgage loan? How will the debt be settled? And what does this mean for your home?
So you’re getting a divorce
When dealing with foreclosure during divorce, the first order of business is to clarify which party (if not both) is legally bound to the mortgage. When married couples first purchase a home, they generally agree to take out a loan—as well as take possession of the property title—together. However, it is not uncommon for only one spouse to assume the mortgage loan, while both spouses take hold of the title.
The bank will come knocking
Once the mortgage goes into foreclosure, the bank will seek payment from whomever signed the mortgage documents. If you and your soon-to-be-ex both signed the mortgage and promissory note, you are both liable. However, if you did not sign the mortgage docs, the bank cannot come after you even if your name does appear on the title.
Either party can decide to assume the loan entirely and release the other from any liability on the debt.But even if you do assume the loan from your spouse, you must still obtain credit approval and show your lender that you do have sufficient income to take over payments.
What happens next?
Establishing who is responsible for the mortgage, and deciding early on whether or not you will keep the home will make avoiding a foreclosure that much easier. Once the divorce is final, you can determine whether a Loan Modification, a Deed in Lieu of Foreclosure, or a Short Sale is the right alternative for you.
Many homeowners are still haunted by the nation’s recent economic standstill, which means that divorce quite frequently coheres with foreclosure. Consulting an experienced divorce attorney will protect your interests and ensure you get through your divorce in one piece.
Stephen K. Hachey, a Florida real estate attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.