During divorce, foreclosure only complicates an already complicated process. In most divorce foreclose cases; the divorce process will require determining the responsible parties for a mortgage debt, as well as other debts relevant to the cause of foreclosure. This is known as the division of assets/debts. Several different, but common cases involve divorce and foreclosure, which are outlined below. The true prediction of an outcome regarding divorce and foreclosure proceedings will be subject to applicable state laws concerning divorce and foreclosure, as well as the case-specific considerations applicable to any given marriage in divorce proceedings.
Determine the Borrower or Mortgagor
In determining who will be liable for losses and foreclosure debts, if the home loan remains unpaid, married couples must first determine who the borrower of their current home loan is. This may be one spouse or both individuals noted as co-borrowers. Though the courts or a meditated divorce agreement may state a given party is responsible for home loan debts, the lenders and courts overseeing foreclosure proceedings will only hold the person, or persons, noted as the borrower of the home loan as responsible for the debt obligation.
When Both Parties of a Divorce Are Co-Borrowers
In the event both spouses are co-borrowers, they are essentially forced to make a decision regarding foreclosure prevention that will be in their shared interest. Allowing a home to foreclose will damage each of the co-borrowers equally, and in turn, regardless of where the divorce proceedings stand, these individuals must take concrete foreclosure prevention action in their own interest, as well as their spouses.
Following pursuit of any foreclosure prevention action, each party will still be responsible for making or meeting obligations of the foreclosure prevention action, as they are both co-borrowers. If not, the foreclosure process is again repeated. If the foreclosure prevention action entails sale of the home, both co-borrowers, or spouse, will be equally responsible for future debt obligations, if a deficiency lien occurs, regardless of the divorce settlement agreement.
Effectively, the only method that allows a divorce settlement agreement to work if foreclosure is impending is if each party upholds and fulfills their obligations noted in a divorce agreement, which will prevent lenders from taking foreclosure action. Once lenders take foreclosure action, each co-borrower will be proportionally responsible for the debt, per the original home loan agreement, at least in the eyes of lender’s taking collections actions.
When a Single Party of the Divorce Is Home Loan Borrower
In certain instances, one spouse may be the sole owner of the home, per the home loan agreement and noted as the only borrower. However, in practice, the other spouse may contribute financially to making outstanding home loan payments, in a fashion similar to that of a co-borrower. In many cases, one spouse will leave their primary residence and no longer contribute to making payments on a given mortgage or deed of trust secured by the primary residence itself. This will leave the second spouse, the one currently residing in the primary residence securing a loan, to make payments on his or her own. If facing foreclosure, lenders often recognize divorce as a viable hardship claim for homeowners tasked with paying mortgage debts on their own after their spouse, with no financial obligation per the home loan agreement, discontinues providing income to support the household.
In cases where a foreclosure workout cannot be obtained or is not feasible given the single homeowners income, the ensuing foreclosure process and future assets retained or debt left over will be become the sole responsibility of the primary home loan borrower, in most cases.
Getting Legal Help
Divorce and foreclosure are both very case-specific situations, which will widely vary from household to household. Getting legal help to address any impending foreclosure during a divorce case is important for both parties to prevent future debt liability following the dissolution of a marriage.
