Final thoughts on Bankruptcy and a transition into discussing the sale of your home in a divorce

When bankruptcy is initiated after a divorce has already concluded, a bankruptcy court will review the divorce decree, and that may be all that they review from your divorce. The critical points for the judge to decide will be the intent of your settlement regarding the property as well as the nature of the debt that had been shared by both you and your ex-spouse.

The judge needs to determine if a debt can be discharged (done away with) in bankruptcy. To make this decision, a judge will look to the section of your divorce decree related to property; whatever the nature of the obligation you or your spouse took on to pay this debt will be judged. Depending on whether the debt payment is more or less to provide support for you or solely for the repayment of a debt by your spouse, that obligation may be discharged in debt and not followed through with as agreed to in your divorce decree.

To try to be as straightforward as possible, during your divorce, it is always wiser to get a clear commitment from your spouse to pay you spousal maintenance if that is what you believe is necessary—allowing your spouse to argue that as an alternative to the payment of explicit spousal maintenance that they will pay a debt is a loss for you. As you can see from today and yesterday’s blog posts, it is possible that a bankruptcy court can discharge your ex-spouse’s obligation to pay a debt.

Wrapping it all up regarding bankruptcy post-divorce

You and your attorney may have put a lot of time and effort into drawing up your final decree of divorce just the way you want it, but the fact is that a bankruptcy court does not have to abide by the labels that you all placed on certain assets, obligations or debts. A bankruptcy court should notify you if your ex-spouse has filed a suit because you are their creditor. If this happens to you, you must contact a bankruptcy attorney to assist you further in making sure that your rights are protected.

The future of your family home in the event of a divorce

Your marital home is likely the most significant investment you and your spouse have ever made. Not only does the home represent your financial commitment to one another, but it also represents your having believed at one time or another that your bond would last forever. Buying a home with another person is a considerable commitment and one that befits two people who have taken vows to honor one another at all times moving forward.

As they relate to your home, questions regarding the value of the house, the amount left on the mortgage to the home as well as whether or not you or your spouse can afford to make the payments on your own are what you need to examine if you are involved in a divorce where the future of the family home is at issue.

Many of the decisions related to the home come back to whether or not your spouse and you have children together, notably school-aged children. If so, you should look around the area where you live to determine how much it costs to rent in your area should your house need to be sold. If you and your spouse want your kids to remain in the same school, this may be a critical consideration to make.

A typical scenario for the sale of a home in a divorce

Commonly, when two spouses choose to (or are ordered by the judge) to sell their home, any equity (sales price minus mortgage value and fees) will be split between the spouses according to the terms of the divorce decree. In some instances, you may receive the home in the divorce, and your spouse will then receive other assets that equal their share in the equity available in the home should it have been sold.

In other situations, the home is sold, and the equity is split. A realtor will be paid to sell the house, and the realtor earns a commission for helping to do so. Costs and fees on top of the mortgage itself will be paid. Any remaining money is called the equity in the home. The other circumstances of your divorce may end up determining what percentage of the equity you get versus what percentage of the equity is retained. For example, if your separate estate is far greater than your spouse’s, they may be awarded a higher home equity rate to provide some balance.

I should note that just because you have put in X amount of dollars into the home in the form of down payment, renovations, and other costs does not mean that you will necessarily be able to recoup that amount plus some as a result of your selling your home. As discussed yesterday, a short sale may need to occur if you and your spouse cannot expect to make up the difference between what is owed on loan versus what the home is sold for. It never makes sense to rush into a short sale for my money.

Listing a home for sale before the conclusion of the divorce may be necessary if it is not expected that the value of the homes in your area will significantly rise shortly. If you and your spouse agree that the house will need to be sold, then coordinating your efforts to select a realtor and put the house on the market is a good idea. If any repairs or improvements need to be made on the property that your coordination can help make this transition easier for everyone involved.

Concepts to think about when putting your home up for sale during the divorce

First of all, it is best to have an agreement before listing the home as far as how the equity in the home will be split once the house does sell and the closing has been completed. Having a rough understanding of a quasi-agreement will not suffice. All this will do is open you all up to a series of arguments about what is and what is not fair. Discuss this subject before you even contact a realtor.

Secondly, you and your spouse should have housing lined up if your home sells faster than anticipated. It cannot be assumed that you will be able to negotiate a lease type set up with the buyers that allow you and your spouse to remain in the home for months after the purchase by the buyers. As such, you all need to be well versed in housing availability in the area.

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Other Articles you may be interested in:

  1. Where Bankruptcy and Family Law Collide in Texas
  2. First comes divorce and then comes bankruptcy: What to expect when one follows the other
  3. Bankruptcy and Divorce
  4. Is a Wife Responsible For Her Deceased Husband’s Credit Card Debt?
  5. What Happens To Debt in Texas Probate?
  6. What Happens to Your Debt When You Pass Away in Texas?
  7. Can I be held responsible for my spouse’s student loan debt if we divorce?
  8. Dividing Your Property and Debt in a Divorce
  9. Military Divorce and division of marital property and debt
  10. How are assets and debts divided in Divorce?
  11. How to untangle your debts during divorce
  12. How is credit card debt handled in a Texas divorce?
  13. Know How Property and Debts are Divided, When Preparing for Your Texas Divorce
  14. What Happens to Marital Debt During a Texas Divorce?

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