Dealing with a loss in your life can be one of the most difficult and stressful events in a person’s life; when two occur at the same time, the loss of a marriage through divorce, and the loss of a home, through foreclosure, the stress can be off the charts.
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Individuals that are dealing with a foreclosure after a divorce are encouraged to seek legal advice to get the proper guidance during a tumultuous time.
Each state has its own set of laws and regulations for divorce and foreclosures; for those facing a foreclosure after divorce in the State of New York, you should start off with the law offices of Moshes Law.
As couples navigate the decision to divorce and go through that process, with regard to the mortgage, the couple has to figure out, under the current loan agreement, who is actually responsible for the debt?
In most cases, younger couples starting their life together typically take out the loan and take the title to the home in a joint fashion; that is they are both responsible for the debt and the property.
In later in life marriages, one spouse might be the only one that took out the loan and signed the appropriate forms, like a promissory note.
These questions have to be answered properly to speak with attorneys as they go through the divorce agreement. It is important to get an attorney or a team that can handle both of these major issues.
In any situation, whether it is a divorce foreclosure or not, it is way better for ALL parties to avoid a foreclosure at all costs. Both the lender and the borrower must take every step to avoid foreclosure because it costs both parties in the end.
Despite possible hard feelings towards a spouse, you must not let your emotions dictate your actions towards your property. Do not let your emotions cost you money. If a sale, short sale, or any other option can save both of you money, it behooves you to take those proper steps.
Do not let a property go into foreclosure as an attempt to financially or emotionally hurt the other spouse. The best thing to do is cut all financial ties in the most profitable way to move on with your life. Keep in mind that a foreclosure will hurt you as well as a co-borrowing spouse and impact your ability to move on with your life.
As an attorney will tell you; take all steps to AVOID foreclosure after divorce.
As we have talked about previously, foreclosure is bad for both the lender and the borrower. Being such a negative situation for both parties, the opportunity to compromise and help each other through difficult times is great.
Just like any other major life decision, adults have to communicate and explain the situation. After speaking with an attorney about your options, some spouses MUST talk with the lender and let them know the situation; they can offer many remedies to ensure the home does not go into foreclosure.
What questions to ask and what options are available to avoid foreclosure depend on who wants to keep the home.
Some divorces are so difficult and damaging that both parties realize that they don’t want to keep the property, whether it be for emotional and/or financial reasons.
In this case, where neither spouse wants to keep the home, there are still great alternatives to letting the property go to foreclosure.
If the divorcing couple realizes that neither of them wants to stay at the property, the renting of the property can prove to be a lucrative move for the borrower/s.
The debt holder/s can keep the home, gain equity and pay for the mortgage through rental payments.
This option also gives a couple time to cool down and reevaluate the situation long after the divorce.
Renting the property is a great alternative if neither spouse wants to keep the former marital home.
Going through a divorce can be an expensive experience, and with that said, one or both of the spouses may find that they can use the money from the sale of the home.
Especially if you have a good amount of equity in the home, it is important to sell the home rather than let it go into foreclosure. Again, speak with an attorney to make sound financial choices for you. Do not let emotion cloud your judgment; a sale is vastly better than a foreclosure.
Often, divorce and foreclosure occur during inconvenient times, such as a depressed real estate market that is not suitable for a traditional home sale. This leaves fewer options for spouses that are going through a divorce.
If your lender can’t modify the loan, lower the interest rate or offer forbearance, then a short sale should be considered. It can be a quick process that sells the property to a third party for less than the total debt.
With a short sale, the lender agrees to take the sale proceeds and releases the lien from the property, allowing the divorcing couple to walk away from the home in a more efficient manner to get on with their lives.
With a deed in lieu of foreclosure, a homeowner voluntarily transfers the title of the home to the bank and the bank releases the mortgage.
Banks are more willing to accept this alternative to foreclosure as long as there are no liens against the property.
Another benefit of this alternative is that you as the owner don’t have to sell the home and leave that process to the bank.
Both a short sale and a deed in lieu of foreclosure offer quick options to walk away from the property while avoiding the damage that a foreclosure can cause to a person’s credit score.
They will still cause a credit score to drop but not as severely as a foreclosure. These options should be considered.
If both spouses want to keep the home, it should be noted that there are risks associated with both divorced parties having legal rights to the home, especially if there is a chance of the home going into foreclosure.
If the divorce is a contentious one, that will require the court to get involved and make determinations, then both spouses probably should not keep the home. If the court gets involved, a quick sale may be needed which will be costly for both parties.
This is a delicate matter and requires the expertise of a lawyer with huge experience. The attorneys at Moshes Law are ready to help you with all of your worries.
If only one spouse is interested in keeping the home, the process becomes a little more simplified as long as the interested spouse can show an ability to pay the debt. With a little communication, the spouse and lender can take a few steps to help with the process.
A loan modification will be needed if the loan is in both names. This modification will drop the uninterested spouse from the debt and free them from that legal burden.
During this modification, the interest rate and amount of payments can be changed, hopefully for the benefit of the one spouse.
Again, if the rates are lower than your current rate, you must refinance to ensure your financial security. It will save you money and make the process of divorce a little more simplified.
If one spouse wants to keep the house and is not on the loan, the borrowing spouse can sign over the deed to the interested spouse. The spouse will then assume the loan and become personally responsible for the debt.
This is another great option to avoid foreclosure.
Whatever you and your former spouse decided in terms of who gets the house, it is important to get legal guidance on how best to navigate the waters to avoid foreclosure.
Divorce is difficult as it is, but foreclosure can follow you and your credit score for decades. It is extremely important for all parties to do their best to avoid foreclosure. Speak with the wonderful attorneys at Moshes Law today
Gennady Litvin, Esq. is an associate with Law Office of Yuriy Moshes, P.C. Mr. Litvin graduated Pace university with a Bachelor’s Degree in Business Economics, and earned his J.D. at the University of Miami School of Law where he was a member of the Business Law Review. Along with his professional law duties, Mr. Litvin has spent much time teaching and mentoring real estate brokers and agents on matters such as when commission is due, commission disputes, and dealing with short sales and foreclosures.