Facing Foreclosure During a Divorce

6303298861_7f0167de47_z

Nearly everyone who has been through a divorce has had to deal with at least some level of financial struggle. For some people, divorce necessitated a complete money mindset makeover. One of the biggest transitions that has to be made when a couple splits relates to the marital home. If you are a homeowner who is currently going through a divorce, you may be wondering if your home will be foreclosed upon by your lender.

Most married couples enter into a mortgage agreement jointly, as they happily begin their lives together. Years later when the marriage is breaking up, it’s much less pleasant to have to disentangle yourself from a joint mortgage loan. Tempers flare, children may be involved, and communication can be complicated and tense.

There are many different answers to the question, “Who will keep the marital home?” However, sometimes neither party wants to or is able to keep up with the payments without the other partner. Of course, other situations may also prevent either party from remaining in the marital home, like new relationships and relocation for work, but the most common reason is lack of finances.

A very important thing to keep in mind as you move through your divorce is that your mortgage lender is not even slightly interested  in the state of your marriage. If you and your spouse signed for the home jointly – you are both equally responsible for the debt.

Although it may be quite difficult, it’s important to keep communication as open as possible when it comes to dividing up your marital assets and debts. Miscommunication on important financial issues can lead to devastating results.

If both parties move out of the marital home and both refuse to continue making monthly payments on the mortgage, the home will quickly go into foreclosure. Foreclosure is not a desirable outcome, especially if there are other plausible options for the property. Don’t let your pride or anger get in the way of making a smart decision that can help you avoid foreclosure!

Discuss with your spouse the idea that one of you remain living in the marital home. If this is a situation that you can both agree to, the spouse living in the home should plan to either assume the loan or refinance it in order to remove the other spouse from liability.

If you plan to go this route, find out if your mortgage contains a due on sale clause.

Remember that one spouse may be entitled to either child support, alimony or both after the divorce is final. This money may be enough to make staying in the marital home a reality for the support receiver, even if they don’t earn enough income on their own to pay the mortgage.

If one party remains in the home but fails to refinance or assume the loan – trouble could be nigh. If at any time, that person decides to stop making mortgage payments, the bank/lender will not care if the parties are happily married, platonic roommates, or divorced and divided.

The only thing that matters to the lender is whose name(s) are on the mortgage loan and promissory note. If both names remain on the documents, it doesn’t matter if you’ve been divorced for a decade – both parties will still be held responsible. Foreclosure of the property will be significantly damaging to both parties’ credit scores.

If you are dealing with foreclosure and divorce, find out what your options are now, before you end up facing a deficiency judgement and a rotten credit score. Ask us all the questions you want in your free consultation so that we can help you decide what steps you want to take next.

Image credit: Don O’Brien

Advertisements

4 Responses to Facing Foreclosure During a Divorce

  1. All assuming your ex will discuss. Learned the hard way what happens when they refuse to sell and refuse to pay.

  2. Pingback: Displaced Homemakers: Getting Back on Track | Veitengruber Law

  3. Pingback: Veitengruber Law and the Divorce Attorney: How We Can Help You | Veitengruber Law

  4. Pingback: Am I Risking Foreclosure for Non-Payment of a Home Equity Loan? | Veitengruber Law

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: