Marital Debt in Divorce: Who Gets the House, Who Gets the Mortgage?
One of the biggest questions that often comes with a divorce is “Who gets to keep the house?” Houses are often one of the most substantial assets a couple has, so it is understandable that the dispute over it gets a lot of focus. However, there is an aspect of dividing up the house that often gets overlooked, the mortgage. Marital property division also includes dividing up the marital debt, so couples going through divorce should be aware that the mortgage will need to be divided up as well. There are some general concerns people going through a divorce should be aware of, as well as special issues in the case of an underwater home, a problem plagues millions of U.S. households.
One of the most important things to understand with a mortgage division is that divorce does not actually affect a person's contractual obligation to pay a debt. This means that when the court makes the mortgage one spouse's obligation, the creditor can still pursue the other in the event that the first spouse fails to pay. Although, it is important to note that the spouse the court did not make responsible would have a recourse against the responsible spouse in court. Of course, if the responsible spouse is not paying their debts in the first place, that right may not be of much practical use.
One way of dealing with this problem is through a mortgage refinancing. Although not all people may qualify for a refinancing of their mortgage, it can help lower a person's interest rate, and it can also take one spouse's name off the mortgage in order to better reflect who is actually responsible for paying off the debt.
With a Home Underwater
In the event that a couple has a mortgage that is more than the value of their home, they have special things to think about in a divorce. One of the major questions is whether to keep the house or to simply sell it to pay down the debt. Of course, if the couple cannot afford the debt service, that decision may be made for them. If the couple can afford to keep paying the mortgage, there may be good reasons for one of them to keep the house. For instance, if the couple has children in a public school, keeping the house can help minimize the disruption in the children's lives. Additionally, if the couple keeps the home, it is possible that its value may rise again, and it could turn out to be profitable. That possibility also necessitates determining how to divide up any proceeds of a future sale during the divorce.
Divorce proceedings often have many issues like this that people do not always think about. If you are considering filing for divorce and want to learn more about how it works, contact an experienced DuPage County divorce lawyer