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Pitfalls of divorce for property owners

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Fort Worth residents who choose to divorce will sometimes have difficult and unforeseen situations arise as they attempt to divide a family home or other marital property. For example, it can come to pass that the house is awarded to one ex-spouse, but the mortgage and financing remain the responsibility of both ex-spouses. This can have a deleterious effect on the credit rating and financial health of someone who has no current connection to the property.

Texas is a "community property" state, which means that all property and assets accrued during the term of the marriage are to be divided equally at the time of the divorce. This can often create a situation where a divorce settlement awards the entire house, an essentially indivisible object, to one member of the partnership with the intention that they pay off whatever the remaining balance may be with their other marital assets and that the property will be shared equally. It is also assumed that they will keep up mortgage payments and other liabilities on the property.

However, if they are unable to make payments on a property that was purchased jointly, then this will affect all signatories of the loan, even those who lost all interest in the house in the divorce. The liability for the loan is tied to the property itself, not the possessor.

It can be wise to refinance the loan at the time of the mortgage, removing the departing partner from the financial picture. This can also provide liquid funds to purchase the ex-spouse's share in the property to which they no longer have any right. A lawyer may be able to help with decisions such as these and provide other important financial details as well as representing their client directly in negotiations with lending agencies and their former spouse.

Source: Credit.com, "How to Divide Your House in a Divorce", Scott Sheldon, July 09, 2014

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