Millennials and Gen X-ers may have heard the name Zsa Zsa Gabor, but it is unlikely they know a thing about the Hungarian-born actress. For the purposes of this blog, all you need to know was that Ms. Gabor was married nine times, divorced seven times, and one marriage was annulled. There is a quote attributed to Zsa Zsa Gabor where she said, “I’m an excellent housekeeper. Every time I get a divorce, I keep the house.”
For many divorcing parties, their house is one of their main assets of the community, so it is almost always a big issue. The parties sometimes agree that one party will decide to buy out the other party’s interest. This is often the case when there are young children and the parents want to maintain as much consistency as possible.
This blog addresses the scenario where one spouse agrees to buyout the other spouse’s interest in the residence. For this example, I am going to assume this is a house purchased during marriage, title was taken in both parties’ name and both parties are on the mortgage.
It’s that last detail that can lead to several problems. Transferring title between spouses is as easy as recording an Interspousal Transfer Deed or Quitclaim Deed, but removing a party’s name from a mortgage requires a refinance.
A good settlement agreement in this situation will contain a provision that the party who is awarded the residence will take all necessary steps to refinance the residence and remove the other spouses name from the mortgage. This provision should have a time frame for the refinance and contingency provisions in the event the party is unable to refinance. Not all agreements have these provisions and that can lead to problems.
Using the same scenario above, its 3 years later and the spouse who did not receive the house in the divorce decides it is time to buy a new house. When the lender runs their credit they find out that their name is still on the loan. Worse, the other spouse was late on several payments and that has negatively affected their credit rating. So…what are their options?
There is very little they can do to change the negative impact to their credit score, which is why it is so important to keep a close eye on your credit rating after a divorce. (More on that in another blog). There is an option the affected party can take to “stop the bleeding.”
The party will need to file a motion to force the sale of the residence in order to have their name removed from the loan. This is typically couched as a motion to enforce the terms of the Judgment. Even poorly drafted Judgments contain provisions about the spouse being awarded the residence also being assigned the debt associated with the mortgage. In this case, that assignment cannot, and has not, been accomplished by way of a refinance of sale, so the terms of the agreement have not been satisfied.
The motion will accomplish one of two things. First, if the failure to refinance was simply laziness, it will force the other party to refinance the residence. The second possible outcome will be the court will order the house sold to effect the terms of the agreement and that will resolve the issue of removing the affected party’s name from the loan.
None of these steps will repair your damaged credit, but it will result in having your name removed from the loan. This is not as simple as it sounds so it is important that you speak with a qualified family law attorney about your rights.
Please contact us if you are considering a divorce from your spouse, a legal separation, or have questions regarding property issues. Nancy J. Bickford is the only Certified Family Law Specialist (CFLS) in San Diego County who is also a licensed Certified Public Accountant (CPA) with a Master of Business Administration (MBA). Don’t settle for less when determining your rights. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.