Divorce and Secured Loans on Shared Ownership Property


If you are going through a divorce, having secured loans on shared ownership property can complicate things. First of all, who will get the property? Next you need to consider whether the loan can be refinanced in one spouse's name. If it can't, your property may be repossessed if your spouse defaults on the loan. The following information from our financial advisor looks at some the options a person has in this situation.

What if he's not helping make the payments on our house and cars?

Kim's Question: Both our names are on the home mortgage and the loans for our cars. I am currently in the house and he is in an apartment. He is refusing to help out with any of the payments on the house or the cars. I cannot afford to make all the payments myself, yet he won't sign anything over to me so I can refinance. He says he is doing it so he can financially ruin me. What can be done?

Brette's Answer: Go to court and seek some temporary orders to get this taken care of.

What should I do if his loan is secured by our jointly-titled land?

Cindi's Question: Several years ago, my husband took out a second loan to obtain money for his business. The loan is secured by approx. 20 acres of property which is in both of our names. His credit is poor and he says he is unable to refinance to pay off the loan. He says that he wants the property to go to our 2 younger children rather than selling it. Would I be responsible for paying the debt if my name is not on the Note and how do I ensure that he follows through with signing the property over to the children like he says?

Timothy's Answer: Typically, banks require both parties to sign a loan that is secured by property that is jointly owned. Although you state the second loan is only in your husband’s name, it is secured by your community property. The creditor would have a right to seize your assets if the debt obligation is not satisfied. As a result, it's very likely the bank will sell your land if the loan payments aren't made. If neither of you can afford to pay the loan, your best bet is to sell off enough property to cover your debt.

My question to you is, why do you want to keep the property? Is your 20 acres of land a productive source of income or is it merely an expense (via the mortgage) with the hope of future appreciation? If you opt to transfer the property to your name, you will need to refinance the loan so it is no longer held in your joint names. Depending on your circumstances this may not be the best option. Think carefully when you consider the costs/benefits of holding the property. If the financial burden is too great, you may want to re-think your decision.

Am I liable for the equity loan if I didn't sign for it?

Dee's Question: My husband took $180,000 out of the mortgage and left. If he doesn't pay, will I be responsible for this debt?

Timothy's Answer: I am troubled by your husband's declaration that he took $180,000 from your mortgage. If the liability was in both your names, you would have been asked to sign documents authorizing the cash withdrawal. The funds would be payable to you and your husband and could not be cashed without both your signatures. The only way he could have gotten the money out was if the mortgage was only in his name. If this is the case, he is legally obligated to make your mortgage payments. If he does not pay, the bank will pursue him legally. If he does not comply, the bank will have the right to initiate a foreclosure.

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