When a 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 key points for the judge to decide will be the intent of your settlement in regard to 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 that you or your spouse took on to pay this debt will be judged. Depending on whether the payment of the debt is more or less to provide support for you or solely for the repayment of 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 clear 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 he or she will pay a debt is a loss for you. As you can see from today and yesterday’s blog posts, it is possible that your ex-spouse’s obligation to pay a debt can be discharged by a bankruptcy court.
Wrapping it all up in regard to 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 provide you with notice of your ex-spouse having filed a suit because you are a creditor of him or her. In the event that this happens to you it is necessary that you 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 largest investment that 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 be one that lasts forever. Buying a home with another person is a huge 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 home, the amount left on themortgage 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.
A lot 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 an especially important consideration to make.
A common 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 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 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 home and a commission is earned by the realtor 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 that is retained. For example, if your separate estate is far greater than that of your spouse then he or she may be awarded a higher percentage of the equity in the home in order 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 a 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 we discussed yesterday, a short sale may need to occur if you and your spouse cannot expect to make up the difference of what is owed on the loan versus what the home is sold for. For my money, it never makes sense to rush into a short sale.
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 in the near future. 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 theproperty 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 in place prior to 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 ought to have housing lined up in the event that 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 allows you and/or your spouse to remain in the home for months after the purchase by the buyers. As such you all need to be well versed on housing availability in the area.
Questions on how to determine if a move is right or wrong? Come back to our blog tomorrow to find out more
If you have questions regarding whether or not it is a good idea to push for your home to be sold in your divorce then you have come to the right blog. Tomorrow we will post our thoughts on this subject in an effort to lend some perspective on the subject.
In the meantime if you have questions about how your family home fits within your divorce case please do not hesitate to contact the Law Office of Bryan Fagan, PLLC today. Our licensed family law attorneys offer free of charge consultations to people in our community six days a week. Our attorneys take great pride in offering the best possible representation for you and your family. If you desire representatives with strength, tenacity and the will to push forward through tough times then you have come to the right place. We thank you for your time and hope to see you again tomorrow.