A few years ago one of our lawyers described our typical divorce case like this. A couple marries, buys a house, divorces three years later, sells the house and each spouse walks away with $50,000. If they weren’t married, they would be happy with this partnership and call it successful, instead of hating each other.
But in this market, housing prices have plummeted to values sometimes below the balance due on the mortgage. Divorce negotiations have turned from how to split up the sales proceeds to who gets stuck with the house.
Even when one spouse agrees to take over the underwater house and the mortgage payments, the other spouse may have to keep their name on the mortgage which may make it difficult to buy another house.