if divorce decree says party has to refinance within certain time and doesnt what happens

Divorce is painful, complicated and often messy. And when there's a mortgage loan involved? That makes life is even more complicated for spouses who are separating.

Ideally, spouses either agree to sell their home or refinance their mortgage and then that but i person'due south name is on information technology. That former spouse is then responsible for making the mortgage payments each month.

Unfortunately, this idea isn't e'er attainable. Often, 1 spouse volition remain in the home. The divorce understanding will and then spell out who is responsible for paying the mortgage.

This tin can pb to serious bug: What if the spouse who lives outside the home is supposed to pay the mortgage but stops doing then? This will cause the other spouse's credit to collapse. This spouse's proper noun remains on the mortgage, so missed payments will drib this owner'south credit score simply as severely as information technology will the spouse's who was supposed to pay.

"A jointly acquired home loan has the unfortunate potential to get a disaster for your credit during a divorce," said Michelle Black, president of Hope4USA, a credit-counseling service in Charlotte, Northward Carolina. "Your mortgage lender will not intendance near your divorce prescript. Your divorce decree will in no way resolve you lot of responsibleness for a jointly caused mortgage loan."

The unfortunate truth? When information technology comes to divorce and mortgage loans, you can take safeguards to protect your credit. Just you tin never guarantee that the mistakes of your onetime spouse won't elevate downward your credit score, too.

The best options

Andrew Vaughn, owner of Chicago law firm NuVorce and a professor of advanced domestic relations constabulary at Loyola University Chicago School of Law, said that the all-time solution for divorcing spouses is to either sell the home or refinance the mortgage in the name of just one of the sometime spouses. That spouse would then be responsible for making the mortgage payments.

These solutions work all-time because the other spouse no longer has to fright missed payments or loan defaults that are the mistake of their former partner. When divorcing couples sell the house, they use the gain of the auction to pay off their loan. When they refinance the loan to ane spouse's proper name, the spouse whose proper noun is no longer on the loan will not see a credit drop even if the other spouse stops making payments.

Merely at that place are times when onetime spouses can't sell the firm or refinance the loan. Maybe they want their children to stay in their home. Possibly neither spouse can authorize for a refinance lone. In such cases, the former couple will spell out how the mortgage is handled in their divorce decree, a less-than-ideal solution.

"The risk is that the bank or lender can however pursue both parties for collection," Vaughn said. "And what if the spouse isn't paying the mortgage because that spouse has no money? And then you lot have a divorce settlement contract that'due south basically worthless because information technology says someone else is responsible who can't pay."

Safeguards

Spouses who can't sell or refinance need to put specific safeguards in the divorce prescript, said Christian Denmon, founding partner of Tampa-based Denmon & Denmon law house.

For example, say the spouse who stays in the home plans to refinance the mortgage into his name. That spouse might hold to make the mortgage payments until he is able to close the refinance. The spouse who is no longer living in the house might worry that her quondam spouse will not be able to qualify for a refinance. This could crusade her serious problems: Her name would then remain on the loan, and if her quondam spouse stops making payments, her credit, as well, will crash.

Denmon said that the former spouse can protect herself past requiring that the divorce settlement state that if her sometime spouse can't refinance the loan within a certain time menses, that the home will immediately go up for sale.

Mortgage payments as part of divorce settlement

Denmon gives another example: Say the ex-married woman keeps the home but her former husband, who has moved out, agrees in the divorce settlement to make the mortgage payments. The ex-wife might worry that her former spouse will all of a sudden cease making the payments, causing her credit, of form, to plummet.

The ex-wife can protect herself by insisting on potent language in the divorce settlement stating that the mortgage payments from her former husband are a class of alimony. The settlement tin spell out that if the married man doesn't brand the mortgage payments, he volition exist held in contempt of court. In many states, a judge can then throw the ex-husband in jail if he doesn't brand his required alimony payments, a strong incentive for the onetime spouse to keep making those mortgage payments, Denmon said.

"The key to protecting both spouses later the divorce is finalized is carefully drafted settlement language," Denmon said.

But even these safeguards aren't perfect. Even if a divorce settlement lists specific penalties for former spouses who fail to make their required mortgage payments, there is no guarantee that these responsible parties will follow the rules.

"Unfortunately, there are no foolproof ways to protect spouses who are co-debtors on a mortgage afterwards a divorce," said Linda Kerns, an chaser in Philadelphia. "The best solution is to refinance or sell. Former spouses must also remember that if the other spouse is sued, goes bankrupt or has a lien filed against them, that will impact the joint property, and brand a messy state of affairs even more complicated."

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Source: https://www.mortgageloan.com/what-happens-to-the-mortgage-after-divorce