Dealing with a foreclosure while going through a divorce can lead to a number of issues. Generally, couples are seeking answers to questions like: Who will get the house? Who will pay the remaining mortgage debt? The responsibility of debt and the ownership of the house will be determined based on the particular circumstances of your marriage and laws affecting your situation.
Who is Responsible to Pay the Mortgage?
The answer to this question largely depends whether the mortgage loan was taken out before or after the marriage. In most cases, married couples obtain the loan together to title the property jointly. However, in other situations, one spouse signs the mortgage in their own name to take out the loan.
If both spouses have signed the mortgage, they will be equally responsible for the debt. Moreover, they will also be liable for deficiency judgment that the lender may bring following a foreclosure. In case only one spouse signed the mortgage papers, the other spouse will not be liable to repay the debt, or any deficiency judgment after a foreclosure.
Who Keeps the House?
There are generally three possible situations that may arise from this question:
- 1. When One Spouse wants the House
When one of the spouses wants to keep the house, there are several things they can do. They may apply for a loan modification, refinance the loan in their name alone, or directly assume the mortgage through the essential paperwork. For assuming the mortgage, they will have to show that they are financially stable enough to afford the monthly payments in order to avoid foreclosure. Most mortgage agreements have a due on sales clause, but it may not be enforceable if the house is transferred during a divorce.
- 2. When Neither Spouse Wants the House
If none of the spouses wants to keep the house, they may have numerous options at their disposal to avoid foreclosure, such as:
- Sell the property and settle the debt
- If the property value has gone down the market value, you can arrange a short sale after getting approval from the lender
- Rent out the house and use the rental income to make the payments
- Completing a deed in lieu of foreclosure
- 3. When Both Spouses Want the House
If both spouses wish to keep or remain in the house, this can create potential problems, ultimately leading to foreclosure. Spouses will have to take the matters to the court that may issue an order to sell the property. This will only lead to raising the cost of the process, as each party will have to pay court and legal fees, and make the situation more difficult.
It can be extremely hard to handle both divorce and foreclosure without any legal guidance. It is recommended that you discuss your case with an experienced foreclosure defense attorney and know what options are available to you. For more information, contact Covert & Covert, LLP at (630) 717-2783 or online to schedule a free consultation today.