Complications arise when homeowners with an equity loan against their home get a divorce. Often couples have a home with a home equity line of credit (HELOC), or a joint mortgage and this can be a major consideration in divorce proceedings. Just because the court awarded your ex-spouse the home and the debt that goes with it does not mean you are off the hook for the payments.
Home equity funds can be easily accessed by your soon-to-former spouse. Home-equity lines frequently provide credit cards or checks. The major credit card companies have no systems requiring joint signatures when a credit card is used and the checks require only one signature. Any spouse suspecting that the other is doing divorce estate planning should cancel all credit lines and put the creditors on notice, in writing, that further debts are not your responsibility.
Responsibility for equity loan debt is not affected by divorce from the lender’s viewpoint. The lender will still report that loan on your credit and hold you responsible in the event of default. Fortunately, if your ex-spouse is paying the loan, it does not have to hold you back from purchasing a home of your own.
If you and your former spouse agree, the divorce decree can clearly state that one of you is not responsible for the payments on the mortgage or HELOC. If this agreement is reached it is advantageous to have the decree require the former spouse who has accepted the responsibility for the loan to refinance the home within a certain amount of time. If your divorce decree does not mention who is ordered to pay the loans, have the decree amended to show which party is responsible for that loan.
Separating from your spouse may not be enough if you wish to exclude yourself from your responsibility for a mortgage or HELOC debt. Some home buyers commit fraud by stating they are separated and no longer responsible for the debt when they really are not. If you are legally separated and have a separation agreement filed with the courts that has been in place for a year, you can ask the lender to exclude you from the debt.
If you have a question regarding Family Law in California please contact us at (818) 926-4420 or visit the Family Law section on our website at Law Offices of Anat Resnik. Call today and we will connect you with Anat Resnik, an experienced, aggressive, affordable Divorce and Family Law Attorney in California. After you have spoken with our California Family Law attorney, we can schedule you a free face to face appointment to discuss your circumstances. If you have questions or are considering any aspect of filing for Divorce, a Paternity issues, Child Custody and Visitation, Spousal Support & Alimony, etc. we can help! Call us now at(818) 926-4420. We look forward to hearing from you and assisting you with any and all family law needs.