Real Estate Blog - Fred Krawczyk & Associates.

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Divorce vs. Foreclosure

DISCLAIMER: I am not an attorney. The information provided is based solely on my experience as a seasoned Real Estate Broker who has closed a few hundred Short Sales.

One of the most contentious areas of dealing with divorced couples who are facing foreclosure is the term severalty. When a married couple purchases a home with financing and both parties are on the loan, the Lender takes the position of severalty meaning both are equally and individually responsible for the entire loan. I often have ex-spouses break down emotionally when they find out that they are still on the hook for the loan payment regardless of what the court ordered the other party to do as part of their divorce decree.

For example ... Party A and Party B have irreconcilable differences and decide to get divorced. Party A and Party B purchased a house together while married and both are on the loan. Its determined that there is no equity in the house. Their divorce decree stipulates that Party A will retain possession of the Property (house), however, Party A is ordered to refinance the Property within a certain period of time putting the Property in Party A's name only. Party B quit claims their ownership of the Property to Party A and figures they are done with Party A and can get on with their life. Guess what? Both parties often face financial hardships as a result of the divorce because they purchased the property based on two incomes and now they are faced with living on their own again and each with their own housing expenses. Party A eventually falls behind on payments and often does not inform Party B. Party B discovers that they cannot get a loan for a car because their credit is now damaged or Party B receives a court summons of foreclosure and wonders how this could have possibly happened. The first response of Party B is denial that they would be affected by the foreclosure law suit because the Property was settled as part of the divorce?

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