My Ex-wife Decided to Short Sell Her House and I am Still on the Mortgage

Real Estate Agent with Keller Williams Realty Louisville East (502) 664-7827

Spouses incur so many risks when they decide NOT to get rid of the marital home and the marital mortgage debt.

If the house is “underwater” or has an “upside down mortgage”, they can short sale the house before or after the divorce is final. Waiting to sell after the divorce could spell disaster.

Just look at these questions asked by a concerned ex-husband who has lost control

  • My ex-wife decided to short sell the house after the divorce. I am still on the original mortgage. The court had awarded her this home a few years ago when we divorced. The house is worth about $100,000 less than the mortgage. What are the ramifications for me, having a a good job and assets?
  • The lender may forgive the deficiency and issue me a 1099-c for their losses which may become taxable income to me.
  • I heard that when the home is a primary residence the borrower may be exempt from paying taxes on the cancelled debt. But, will I have to pay tax, since technically that home is not my primary residence anymore?
  • Will I have to pay taxes on the whole amount or just on half with the ex-wife paying tax on the other half?
  • Does being divorced and house being awarded to the ex make any difference what so ever?
  • Another scenario may be the bank not forgiving the deficiency. Will the bank then sue me alone, since I am employed and my ex is not?
  • If the bank gets a deficiency judgment what power does that give them? Wage garnishment? Sweeping money out of my bank accounts? Forcing the sale of my assets?
  • How do I contain my losses?
  • What other risks am I incurring that I don’t even know about?

Wow. The problem is these are all valid questions.

All the above questions have complicated and fact-specific answers that need to be addressed by divorce attorneys, tax attorneys or CPA’s. A debt specialist attorney such as bankruptcy attorney or collections attorney may need to be consulted, also.


The frustrating problem is these questions should have been addressed and reflected in the divorce agreement that was crafted years prior.

  • The post-short sale or post-foreclosure tax and judgment burdens may be disproportionately carried by the husband, in this case.
  • These heavy losses were probably not calculated in the division of assets agreement.
  • How likely is it the divorce agreement will be amended and have the ex-wife sell assets or write a check to the ex-husband to cover his new disproportionate burden? Not very likely.
  • Who will pay the divorce attorneys to negotiate a new deal?

The Lesson: Pay Careful Attention to the Future Risks of the Marital Mortgage Debt

Yes, the habitual residence is a key consideration of child custody issues. Yes, keeping the marital home is often a trophy and a victory. But in a depressed housing market the mortgage debt may explode later on, causing more damage to one or both of the ex-spouses than the financial or emotional victories gained in the divorce battle.

During the divorce, the spouses and the divorce lawyers should consult with a Realtor who is a short sale specialist. The Realtor should also specialize in divorce situations.

In the Louisville KY are please call Dave Halpern any time at (502) 664-7827.

Posted by



Dave Halpern, Realtor

The Dave Halpern Real Estate Group

Keller Williams Realty Louisville East


(502) 664-7827



View Dave Halpern's profile on LinkedIndave_halpern twitterhalperndave_facebookDave Halpern QR CodeLouisville Foreclosure Realtors Dave Halpern


Re-Blogged 9 times:

Re-Blogged By Re-Blogged At
  1. Barb Van Stensel 06/03/2011 05:13 PM
  2. Tagrid Shunia 06/04/2011 08:18 AM
  3. Amy Plotts 06/06/2011 03:01 AM
  4. Randal Jenkins 06/06/2011 03:22 AM
  5. D B 06/06/2011 08:44 AM
  6. Heather Littrell 06/07/2011 03:08 PM
  7. Jon Zolsky, Daytona Beach, FL 06/07/2011 04:02 PM
  8. Tim Peterson 06/07/2011 04:48 PM
  9. Gabe Sanders 06/08/2011 08:56 AM
Home Selling
Kentucky Jefferson County Louisville
Divorce and Real Estate
Sharing Information of Short Sales
Short Sales
Short Sales Specialists
Voice of Reason
divorce attorney
divorce agreement
marital debt
marital home
short sell
short sale

Spam prevention
Show All Comments
Debbe Perry
Real Living Carolina Property - Morganton, NC
828.439.3084 Morganton/Lake James NC

OMG - life is so complicated that it's hard to keep up. and then when our clients' own divorce attorneys don't do there job - well, what to do??

Read ActiveRain blogs, I guess!! Thanks for the incredible info.

Jun 06, 2011 06:24 AM #39
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Courts and banks are two separate entities with different concerns. And the banks don't care about divorce decrees or who gets what. If you signed the note, you signed the note.

I seriously doubt if an attorney could have gotten this man's name off the debt without a refinance in the wife's name. Banks just don't say "Oh, OK, we'll release your liability."

Jun 06, 2011 06:32 AM #40
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

Now that is just one more reason why you need to divide everything after a divorce. I have heard of this before and it was also the wife that did it. Liability, liability.............getting divorced? Sever ALL ties other than verbal.

Jun 06, 2011 06:59 AM #41
Catherine Marrone
Integrity Residential Brokerage LLC - West Newbury, MA
West Newbury MA real estate, Essex County

Excellent and timely article.  I run into this all the time and it is a mine field. I remember when the biggest issue between divorced couples was when you found out they still had a joint credit card and "one of them" ran up a tab.

Jun 06, 2011 07:16 AM #42
Eric Peltier
Eric Peltier - Premier Mortgage Group - Boulder Colorado - Boulder, CO
Mortgage Lender in Boulder CO

This is just a tiny added matter compared to the money matters but here it is:  If the wife short-sales, and the departed spouse agrees to it (which he must if on the Note), the departed spouse will not be able to get a new mortgage for quite a few years as Fannie/Freddie/FHA make you wait a varying amount of time.  3 years minimum.

Jun 06, 2011 07:19 AM #43
Jeff Pearl

I just went through this scenario with a divorced couple in Fairfax. Luckily, he had enough equity that he was able to refi ( at a cost of $10,000.00+) to have his wifes name removed from the mortgage. He is not in a short sale situation as of yet, but is thinking about selling and needed her name off the mortgage. She already had agreed to have her name removed from the deed in divorce agreement. She plans to buy another house, but couldn't if her name was still on their old mortgage.

Jun 06, 2011 07:20 AM #44
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time

We have to deal with this quite frequently. It sucks!! Trying to get financial info from a disgruntled ex is not a good thing. Even worse when the spouse that has possession doesn't want to move and isn't on the note.

Jun 06, 2011 07:25 AM #45
Deborah L. Kessler
Hawaii Life Real Estate Brokers - Kapaa, HI
Kauai Broker

I just went through this same thing but luckily for me (or maybe for my ex-husband) he was only on the deed and not on the mortgage. So I get the ding to my credit for short selling the house and all he had to do was sign off on the deed at the sale. It definitely makes me think of how to hold title in the next property I buy.

Jun 06, 2011 08:05 AM #46
Robert Bob Gilbert
Berkshire Hathaway HomeServices Anderson Properties - Katy, TX
Your Katy TX ( West of Houston) Real Estate Expert

Very complicated issue and thanks for issuing the warning as this is valuable advice.

Jun 06, 2011 08:29 AM #47
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Only a professional will create a solution that protects the assets of either spouse, yet many don't engage professionals because they want to save money. To save money always hire a professional that offers a total asset protection solution in writing.

Jun 06, 2011 09:06 AM #48
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

A good reason for divorce attorneys to have a lender on their speed dial.   Then we can help with the possibility of a refinance to the party maintaining the house.

Jun 06, 2011 09:14 AM #49
The Hollinden Team
EXP Realty - Louisville, KY
Serving the Greater Louisville area

Dave, this is a great and though provoking article.  I also see it a lot. In most situations that I see is that the spouse that gets the house will have a hard time making payments if both were working before.  I am not sure that either spouse was thinking clearly when they awarded or were awarded the property.

The end result is both of their credit scores going down the tube.

Jun 06, 2011 10:21 AM #50
nobody - Alamance, NT

Just not right, too often divorcees encounter these issues years after the divorce. Time to revamp the system.

Jun 06, 2011 01:25 PM #51
Phil Parisi
Laviano & Associates Real Estate Professionals - Jensen Beach, FL
Specializing in Florida's Treasure Coast

Thanks for the post, I have not encountered this senior yet, but now I will have the foundation to deal with it should it arise



Jun 07, 2011 02:34 AM #52
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices


Just wow. I read the post and I could not answer any of these questions, and it really does not happen that often -LOL.

Itis an excellent post, and what a comment thread. I am reblogging it

Jun 07, 2011 03:38 PM #53
Tim Peterson
Wisconsin Realtor Safety and Concealed Carry Classes - Madison, WI
Realtor Safety Training Classes

Hi Dave. Wow scary stuff and all too true. Divorce can be so messy-thanks

Jun 07, 2011 04:46 PM #54
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Sounds like something to keep the attornys busy and paying their mortgages.  Thanks for a good post.

Jun 08, 2011 09:51 AM #55
Dawn A Fabiszak
Private Label Realty ( Denver metro area, Colorado - Aurora, CO
The Dawn of a New Real Estate Experience!

Dave ~ these are some questions that folks don't thnk about until it's too late.  I'm bookmarking this.

Jun 09, 2011 06:40 AM #56
Ellen Wright Adams
Academy Mortgage.......We are a Equal Housing Lender - Eugene, OR
LoansByEllen- Licensed in Oregon

Dave this is great information.  I've seen this kind of situation more than I thought I would.

Jun 12, 2011 10:13 AM #57
Ron Marshall
Marshall Enterprises - Saint Michael, MN
Birdhouse Builder Extraordinaire

This is a great reminder that all property should be sold when you have your name on a mortgage, car loan, whatever asset.  And, then divide the proceeds if there are any.

Jun 13, 2011 01:13 AM #58
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Dave Halpern

Louisville Short Sale Expert
Ask me a question

Additional Information