Q: I've been divorced for almost 2 years. My ex-husband was awarded the house and subsequently took over the payments. He has been laid off several times over the last two year, failed to qualify for unemployment, and still has not refinanced the house to remove my name from both mortgages. Because of this, my credit has been shot. Today, he called and offered me the house. He's officially four months behind on payments and received a letter from the mortgage company saying he has 30 days to seek counseling or they will foreclose. I have told him I cannot afford to take over the payments and refinance the mortgages in my name. Should he file for bankruptcy or just let the house get foreclosed upon? What will happen to me?
A: It's unfortunate that your ex-husband didn't refinance the property immediately as a condition of the divorce. If your name is on the mortgage, you are legally responsible for the entire debt, not just half. While the divorce decree does give you some cover, the loan documents with the lender are still in your name. Since your husband is four months delinquent in his mortgage payments, your credit history will look as though you are four months behind in paying the mortgage.
I'm sure you don't want this property, but you should figure out if you can rent it to bring in enough cash to cover the mortgage payments. If not, then you should expect the property to go into foreclosure, whether or not your ex-spouse files for bankruptcy. Your credit will then reflect a foreclosure, which will mean that you will not be able to get a Fannie Mae, Freddie Mac or FHA loan for between 2 to 5 years, depending on the circumstances.
Finally, because you are named on the mortgage, the lender will consider you legally and financially responsible for the debt. If you have assets, the lender may go after those assets to repay the balance owed.
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