Last year divorce rates fell 4% after a 7% increase in 2007, according to the National Marriage Project. Although some family advocates are happy, this drop in divorce rates is likely a result of the recession. A recent article from SmartMoney stated that many couples looking to pursue a divorce feel trapped by their financial commitment to their home. Because houses have fallen dramatically in value, couples do not want to sell their homes during a divorce and face the major loss on their property.
Even if the couple chooses to keep their house while going through a divorce, more complications could occur down the road. One spouse could stay in the house and take responsibility for the mortgage, but if they miss a payment, the other spouse could still be held liable. The departing spouse would have to assume this responsibility despite having no claim to the equity in the house.
In response to this difficult situation, three options are offered to couples sharing a house:
First, the divorcing couple could wait the market out and assume joint custody of the house. If a spouse moved out, he or she could rent another house, but would find it hard to buy any property with an outstanding mortgage on the house the couple shares. Upon selling the house, both partners would get half of the proceeds.
A second option for divorcing couples would be to both move out and rent out the current house. The couple is likely to save money on this arrangement rather than paying a mortgage, but it does force the couple to stay in a transition phase for a long time because of the outstanding financial relationship with each other.
The final option is to accept the financial loss and sell the house immediately. This option hurts each person’s credit score, but it allows the couple to separate from each other financially. Couples going through divorce while sharing a house are encouraged to explore their options fully to decide what arrangement works best for them.
At the Men’s Divorce Law Firm, we have built strong business relationships with realtors, appraisers, financial advisors, and credit analysts to help guide our clients appropriately through their divorce during these tough times. We understand that continuing to keep yourself in a hostile environment due to finances can be detrimental to the healing process of a divorce. Contact us today to get more information about going through with a divorce during a recession.
Click here to read SmartMoney’s article, “A Recession Divorce: No one wants the house”
