Sally is Divorced and Ex-Husband Has Stopped Paying Mortgages

“Dear Steve,

Hi, I am hoping for some help. I have read some stuff already on your website regarding this, but my situation is a bit different.

My ex-husband and I are divorced for a year, separated for 2 yrs prior to that. In our separation agreement it states that he is responsible for 2 investment properties we have in another state. He has paid on them up until last month Nov. 2008. He is claiming that he cannot afford the homes even though he makes 150K/yr and has a 450K home.

I just signed over the martial home to him Sept 2008 and he just paid me the money out of my house. I cannot buy a new home right now because I lost my job, typically I make 80K a year. So now he wants both homes to go into foreclosure.

We could not refinance the homes because the loan value is worth more than market value of the homes. So in a court order it is stated that he is taking over the homes until he can refinance them and that he will pay any of my legal fees or losses incurred if he forecloses. Since he has showed that he has paid on the properties himself since the separation will this matter to a credit company (FICO)?

What do I do with the money I was finally given for my marital home. My credit score went from an 815 to 640 in the divorce already. Is it best to declare bankrupcy now or foreclosure. I would like to buy a home of my own by 2010.

Please advise. Thank you!


Dear Sally,

In all my years of helping people, financial problems in divorce are always traumatic. There is so much weight, emotion, and anger placed around these issues that there is never a winner.

Sadly, whatever it says in the separation agreement is a deal between you and your ex-husband and not you and your creditors. As long as you jointly signed for those mortgages, the lenders will still hold you jointly liable for those debts.

If the properties go to foreclosure, the fact that he made a promise to you to cover your liability and costs will not make a bit of difference to your FICO credit score or to the lenders. Again, that is an agreement between you and your spouse, not you and the lender. What the lender will report to the credit bureaus and your credit report, which will impact your credit score, is that you failed to pay on a timely basis and lost the property to foreclosure.

Your options are limited right now. I think you should assume that the other homes will be lost to foreclosure, your ex-husband will not have money to cover your liabilities for those homes and that the lenders will come after you. You should immediately go and speak with a bankruptcy lawyer as soon as possible to do some planning to prepare yourself if all of this dumps on you.

The most important question you need to ask is if the money you received is protected at all from the mortgage lenders or can they go after that to repay some of the money owed on the soon to be defaulted homes. Seek legal advice, now!

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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