An unfortunate byproduct of going through a divorce is that selling the family home is often a reality that needs to be faced. Whether doing so is an order of the court or is agreed upon by you and your spouse, the fact remains that it will likely not be easy to go through with the process of selling your home. For many families, this is because so many memories are built within the house's four walls, and leaving them there will take some effort. Unfortunately for other families, the problem has more to do with the family's finances and the ability of the home to be sold for a profit.
A short sale is an option that some families pursue to deal with the reality of a house not generating any profit upon its sale. This is commonly called being "underwater" on the home- where the value of the home on the open market is outstripped by the debt owed on the mortgage. When there is no equity in the home, you will need to contact the bank or company that holds your mortgage and work with them on selling the house.
The arrangement would work out this way: the property (your home) would be sold for less than what the mortgage states is owed. You would not be able to do this without the surrender of the mortgage company. In the typical sale of a home, you would go out and seek fair market value based on multiple offers and an appraisal of how the home's weight compares to other similar homes in your area. A closing document will disclose to the mortgage company that you are not pocketing some of the profit made on the sale of the house and are applying every penny that you can to the mortgage.
If you are interested in a short sale, get ready to be patient
Short sales typically take a very long time to both be approved and to go through the process of the deal itself. Most mortgage companies have information that can be made available to you before engaging the sale so that you can anticipate what needs to happen and how best to ensure that all your boxes are checked.
A short sale may not be the cure for all of your money woes, however. First of all, if yours is a family with a more than modest income, you may not even qualify for a short sale. An inability to pay the loan must be demonstrated before your mortgage company is likely to consider the possibility of approving a quick sale. If you are thinking of moving towards a short deal, you should do a pretty heavy-duty analysis of your finances before taking the plunge.
Another consideration you ought to make when pushing for a short sale is how long you and your family need to remain there for shelter. Divorce often brings financial issues to bear for families like yours. The great investor Warren Buffet is fond of saying that it is obvious who was skinny dipping when the tide goes out. Meaning: when times are tough, it is then that we can see who was not prepared. If divorce is already stretching your financially strapped family thinner than usual, it may not make sense to make a short sale if you don't have the resources to find shelter elsewhere.
Short sales are preferable to foreclosure.
The only time that it makes sense to make a short sale is if foreclosure is a reality your family faces if the short sales are either not pursued or not approved by your mortgage lender. The key for you, and about the only reason you would want to make a short sale, is if your mortgage lender releases you from future liability under your loan after the short sale has been completed. With this in mind, you should always have your attorney review the temporary sale contract to ensure your liability to the lender ends when the short sale is completed.
A person that works professionally in the world of real estate or an attorney should be by your side if you decide to pursue a short sale. It is preferable to have someone who knows how to work a temporary deal in Texas and knows our state's foreclosure laws.
When should you file bankruptcy?
Timing is everything. Undoubtedly you have heard that expression used before. If you face divorce, then timing is even more of the essence. A joint bankruptcy can frequently reduce the cost of a divorce case because you will be paying one filing fee instead of two and can share an attorney. Once you have gotten issues regarding unsecured debt out of the picture (credit cards), you can then shift your attention to child support and custody issues.
A problem that you and your spouse may run into if you consider filing a joint bankruptcy suit is that many bankruptcy attorneys will not take your case. This is because when spouses are going through a conflict like a divorce, it is possible you will not be able to agree with your spouse on any issues to complete a Chapter 7 bankruptcy. A Chapter 13 bankruptcy takes far longer than a Chapter 7 (often four or five years) and is not a viable choice for you and your spouse since your proceedings need to wrap up quickly in order so that your divorce can wrap up quickly.
Undoubtedly a bankruptcy will delay the completion of your divorce; there is no way of getting around this fact. In the instances where I have seen a bankruptcy filed concurrently with a divorce, it has been done to stop a home from being foreclosed or stop a massive amount of debt from being collected. I have heard of situations where a spouse will file for bankruptcy to gain a strategic planning advantage in the divorce, but this is not an option for most people.
Consider filing for bankruptcy after your divorce has already been completed.
If you want the best chance to get some closure on your debts, your best bet may be to forego filing for bankruptcy during your divorce and instead file for bankruptcy once your divorce has concluded. Some family law attorneys would argue that because there is debt on the negotiating table, both sides are kept more honest and realistic in their positions. This is an argument dependent on your case's specific facts.
If you are in a divorce and your spouse has filed for bankruptcy, read our blog tomorrow to find out what will happen now.
First, your spouse files for divorce from you. Now that your case is underway, you are hit over the head with an update that they have filed for bankruptcy. You may be wondering what will happen next? To find out what will likely happen, you should return to our blog tomorrow to learn with us. We are excited to share some essential tips and advice with you.
Questions about divorce or family law? Contact the Law Office of Bryan Fagan today.
The Law Office of Bryan Fagan, PLLC, represents clients across southeast Texas- from Baytown to Katy and all points in between. We must put your interests ahead of our own, which is a responsibility that we take very seriously. If you find yourself in need of some advice regarding a family law case, please do not hesitate to contact our office. We offer free of charge consultations to those people in our community who need some perspective and conversation regarding their life. We can meet with you six days a week and look forward to the opportunity to do so.