For many years, the standard process of getting a divorce included dividing up the marital residence. Whether the divorcing couple decided to sell the home and split the proceeds or allow one spouse and the children the ability to continue to living in the house, the marital residence was considered an asset that the couple had to divide, sell, or figure out how to appropriate.

But now, since the real estate market crash in 2008, more and more couples are finding that the marital residence is a liability. And many of them are finding in a divorce that not only are they not able to sell the home, neither of them wants to keep it, either, because the balance of the mortgage is greater than the appraised value of the home. The problem of what to do with a so-called “under water” marital residence is plaguing many couples who are divorcing. And still more of them are reluctant even to file for divorce because they feel trapped in their mortgage obligations.

There are alternatives, however, to staying in a home and a bad marriage just because of decreased real estate prices. Many couples have had success in working with their mortgage lenders – often through attorneys – to refinance the home in one party’s name. This is most commonly accomplished by the other party giving a quit-claim deed to the spouse who intends to keep the home. Often, this agreement can be incorporated into the couple’s marital settlement agreement. There can be delays in this process, and sometimes the parties must return to court after the divorce is finalized to give the court a status on how the refinancing is progressing. This process allows the person who remains in the house to own it free and clear of the other spouse’s claims, and allows the other spouse to be free of the debt obligations to get a fresh start without the old mortgage weighing down his or her credit score.

Another option is for both parties to walk away from the home by negotiating a so called “deed in lieu of foreclosure” through an attorney. This allows a couple to essentially turn in the keys to their home to the bank in exchange for walking away from the debt. This, too, is something best discussed with an attorney and an accountant so that they can discuss the tax implications of debt forgiveness.

There are other options, too, such as personal bankruptcy and “short sales” of homes that are not worth the mortgage balance. Contact an attorney at Lavelle Law to discuss these options with your home and your divorce.