Considering that financial stress is often a contributing cause of divorce and that the divorce process also often results in financial losses for both spouses, it is understandable that you may find yourself at risk of foreclosure on your home before, during, or after your divorce. Foreclosure can be difficult to deal with under any circumstances, but when connected with divorce, it is further complicated by questions of ownership of the home. An attorney who has experience with both divorce and foreclosure proceedings can help you decide how best to proceed.
A Home Can Be a Marital Asset and a Marital Debt
According to New York law, the term “marital property” applies to most assets and debts acquired by either spouse during marriage, and when a marriage ends in divorce, this property must be distributed equitably between the two spouses. A couple’s home frequently qualifies as marital property, especially if both spouses are named in the purchase agreement. In such cases, the divorce will need to resolve not only how equity in the home will be allocated, but also how any remaining mortgage debt will be allocated.
In some cases, divorcing couples will choose to sell the home and distribute any proceeds. In other cases, one spouse may wish to keep the home and take on the mortgage. However, when there is a risk of foreclosure, both of these options can become more complicated.
Selling the Home
If foreclosure proceedings have not already been initiated, but both you and your spouse are concerned about being able to afford mortgage payments on your own after the divorce, the best option may be to sell the home, use the proceeds to pay off the remainder of the mortgage and distribute anything that is left over. However, if you are already in the midst of foreclosure, or if the value of the home is less than the amount of your remaining mortgage, selling the home on your own will likely not be possible. Instead, you may need to talk to your lender about a short sale or deed in lieu of foreclosure, in which your mortgage deficiency may be forgiven.
Transferring the Home to One Spouse
If one spouse is set on keeping the home after the divorce, it is important for that person to consider whether they will be able to afford it. Additionally, a court order awarding the home to one spouse will likely not be sufficient to protect the other spouse from future foreclosure proceedings or deficiency judgments from the lender in the event that the spouse with the home becomes delinquent on payments. Whenever possible, it is important to take the additional step to refinance the loan in one spouse’s name. Another benefit of refinancing is that if the spouse with the home does struggle to make mortgage payments in the future, they may be able to pursue relief through loan modification, forbearance, or bankruptcy without requiring their former spouse’s involvement.
Contact a Rockland County Foreclosure Attorney
At the Law Offices of Robert S. Lewis, P.C., we understand the financial complications of divorce and foreclosure, and we will work with you to determine how best to handle your marital home in order to avoid facing financial hardship. Call our experienced Hudson Valley Area divorce lawyer today at 845-358-7100 to schedule a free consultation.