California Divorce Info Blog

Determining whether and how to keep the house is frequently one of if not the biggest issue a spouse has in their divorce case.  Oftentimes it is the most significant asset a couple owns and sometimes the only one which can be readily converted into cash without any kind of tax penalty. In the final analysis, the decision that must be made is whether you keep the house, your spouse keeps the house or the property is liquidated and the equity split between the parties. This article will explore the analysis someone should go through in a divorce case when facing this decision.

One possibility is that you keep the house, either by an agreed settlement or after a trial.  Generally this means that you would be awarded the property and you would be entirely responsible for the debt attached to that property.  One of the key issues that should be considered is whether post-divorce you can afford it.  Often it is simply not possible for either spouse to handle the payments and related expenses on just one person’s income.  You should carefully analyze whether your income will be sufficient to allow this.  Another issue that must be addressed is whether your spouse will expect that the mortgage be refinanced in order to remove their name.  Again, depending on your financial circumstances, you may have difficulty qualifying for the mortgage alone and terms may not be nearly as favorable as what you have in the current mortgage.  The bottom line is that you need to carefully evaluate this significant financial decision before making a rash emotional commitment to a financial obligation which may later be impossible to live up to.

A second possibility is that your spouse keeps the house, again either by agreement or after a trial.  Conversely, this would mean they would be awarded the property and would be entirely responsible for payment of the debt on that asset.  If you are the spouse not receiving the house it is very much desirable that the mortgage be refinanced so that your name is deleted from that debt.  This is critical because if your ex were to default under the current mortgage at a later date it could dramatically impact your credit rating and even expose you to a possible lawsuit.  The only way to avoid this situation is to have the debt refinanced so that your name is removed.

A final possibility, and one that is often the best option, is that the property is sold and the net proceeds (sales price less cost of sale and any indebtedness) are split between the parties on a percentage basis.  This option avoids the refinance issue because the debt is paid off at the time of divorce.  Also, neither spouse is placed in the position of attempting to afford the monthly expense of a house that was purchased based on conditions that are no longer accurate (dual income household, larger home needed for entire family, etc.).  In the majority of cases this option is usually the best fit, although circumstances do vary.

As you can see deciding how to handle the marital residence in a divorce case is a complicated.  Whether you decide to keep the home, let your spouse have the residence, or sell it and split the proceeds, the situation needs to be carefully analyzed.  As long as you go into it thinking with your head and not your heart you’ll make a good decision and do just fine.

A divorce can be devastating and negatively impact both spouses.  Whether you are the husband or wife, it is likely that you will experience some financial problems after a divorce.  If your finances are not managed properly, the situation can be exacerbated and made even worse.  It is important to remember that a divorce can cause more than just emotional trauma, in some cases it can lead to financial devastation.  Here are a few tips that will help you avoid some of the most common problems and allow you to flourish after a divorce:

1.  Before you file for divorce make sure that it is really, truly your best option and that reconciliation and building a happy marriage is simply not a possibility.  Consider not just the emotional issues but also the economic and financial considerations for your post-divorce life.  Financial ruin can be the result if you don’t carefully consider your true situation post-divorce.

2.  If you have suffered abuse from your spouse such as verbal abuse, physical abuse, and mental abuse, you should document those specific events for potential use in your court case.  These issues can, in certain jurisdictions, make a significant difference in the outcome of your divorce case.  If you have children and are likely to get primary custody it is your right and duty to seek and obtain child support to help cover the expenses of raising children.

3.  Understand the importance of objectively considering your post-divorce circumstances, especially your financial situation.  Create a spreadsheet and realistically look at how much money you will need each month to cover your expenses.  This may require making some assumptions, like how much your housing and utility expenses will be in a new residence.  Then compare these expenses to your typical monthly income, as well as any child support you expect to receive, and see how your monthly income compares to your monthly expenses.

4.  It is very common for people to require lifestyle changes after a divorce in order to financially survive.  One helpful thing to do when planning for a divorce is to start saving cash in a bank account in which you are the sole account holder (in other words, your spouse cannot clean out the account).  This money can be of great assistance during the divorce process if you find yourself short on funds.  That is not to say you should “hide” the money, you should let your attorney know of its existence and never deny that you have it.

5.  If possible you want to reduce credit card debt and other liabilities prior to divorce.  It is also important to establish your own credit, if you don’t have credit available to you already.  As I mentioned above, you want to open your own bank accounts so you do not have to worry about your spouse and emptying out all of the accounts unexpectedly and leaving you without any available cash.

6.  A detailed plan created prior to pursuing a divorce case is extremely helpful in addressing and avoiding any long-term financial issues.  If your standard of living is going to decrease post-divorce, you want to know this as early in the process as possible so that you can plan and act accordingly.  Talk to divorced friends who have been through the situation and can advise you as to how to best cope with the post-divorce finances.

7.  Find out as much as you can about the assets that you and your spouse own.  If you are the spouse who has handled the finances during the marriage, great.  If you’re not, this will require some homework on your part.  In order to get a fair property division in your divorce case you will need to be very familiar with what assets exist.  This is an area where a qualified family law attorney can be of great assistance.

8.  If you are awarded real estate in the property division, make sure that any necessary deed transfers are completed along with your divorce.  It is not enough that your divorce decree says that you’re awarded the house, there must also be a deed, recorded with the proper authorities, which reflects your sole ownership of that property.