Bankruptcy discharge & division of property in divorce

[sjnelson777]

What is the name of your state (only U.S. law)? NC
My husband and I have been living apart almost a year and are filing for divorce soon. He remains in our home. We declared bankruptcy and were discharged almost 2 years ago. We exempted the house in the bankruptcy but chose to voluntarily continue making payments in order to remain in the home. Both the mortgage & home equity loans are in my name, however both our names are on the deed. As he has always paid both the mortgage & home equity, he wants to keep the home. I want to try and sell & split the profits (if any) or make him refinance to buy out my portion of the equity but to also get my name off the existing loans. His arguments are that there’s no need to re-finance since 1) there is no longer any financially responsibility on my end to fulfill the loan obligation & we’re voluntarily paying for the loans 2) the loans are no longer being reported on my credit report, and 3) if needed, and he could walk away from the home because of the bankruptcy without any penalty to me should he no longer be able to afford the payments. I confirmed with our bankruptcy lawyer and was assured that if he couldn’t afford the payments and had to forfeit the home, the banks STILL couldn’t come after me for payments or hold me liable for money owed (should the bank sell for less than what is owed on the existing loan) and that it wouldn’t be reported on my credit report because of the bankruptcy should they have to foreclose on the home. I’m still uncomfortable with this and would rather have my name wiped off completely by selling/refinancing. He doesn’t want to refinance for several reasons – 1) he’s self-employed and may have difficulty getting a loan in his name 2) would most likely receive a higher loan interest rate, and 3) why be financially responsible for a new loan in his name since the way it’s currently structured in my name benefits him, and if there truly is no financial pitfall for me because of the bankruptcy, why change anything?. So, my question is, should I find there is no profit to be made by selling or refinancing, how would you suggest our divorce papers be structured to protect my financial interests? Do you see any financial pitfalls on my end with the information I provided if what I’ve been told is true?
Thank you,What is the name of your state (only U.S. law)?

 

[larocque1]

What is the name of your state (only U.S. law)? NC
My husband and I have been living apart almost a year and are filing for divorce soon. He remains in our home. We declared bankruptcy and were discharged almost 2 years ago. We exempted the house in the bankruptcy but chose to voluntarily continue making payments in order to remain in the home. Both the mortgage & home equity loans are in my name, however both our names are on the deed. As he has always paid both the mortgage & home equity, he wants to keep the home. I want to try and sell & split the profits (if any) or make him refinance to buy out my portion of the equity but to also get my name off the existing loans. His arguments are that there’s no need to re-finance since 1) there is no longer any financially responsibility on my end to fulfill the loan obligation & we’re voluntarily paying for the loans 2) the loans are no longer being reported on my credit report, and 3) if needed, and he could walk away from the home because of the bankruptcy without any penalty to me should he no longer be able to afford the payments. I confirmed with our bankruptcy lawyer and was assured that if he couldn’t afford the payments and had to forfeit the home, the banks STILL couldn’t come after me for payments or hold me liable for money owed (should the bank sell for less than what is owed on the existing loan) and that it wouldn’t be reported on my credit report because of the bankruptcy should they have to foreclose on the home. I’m still uncomfortable with this and would rather have my name wiped off completely by selling/refinancing. He doesn’t want to refinance for several reasons – 1) he’s self-employed and may have difficulty getting a loan in his name 2) would most likely receive a higher loan interest rate, and 3) why be financially responsible for a new loan in his name since the way it’s currently structured in my name benefits him, and if there truly is no financial pitfall for me because of the bankruptcy, why change anything?. So, my question is, should I find there is no profit to be made by selling or refinancing, how would you suggest our divorce papers be structured to protect my financial interests? Do you see any financial pitfalls on my end with the information I provided if what I’ve been told is true?
Thank you,What is the name of your state (only U.S. law)?

All the points you made are correct concerning your house and mortgage status. The loan no longer exists and you do not need to worry. The only reason the mortgage company has not filed a foreclosure on the home yet is because they are getting paid. However, my guess is because the mortgage company really does not want to deal with another foreclosure since the loan is being paid; it is a "back burner" issue for them to be visited later.

Make no mistake, without reaffirming the loan, the mortgage company can process a foreclosure on the home any time they want. There is nothing legally binding you or your soon to be "ex" to the loan; they can do nothing if all of a sudden the loan payments just stop (other than foreclose) and you both just abandon the property.

A divorce attorney should know how to proceed in your case as far as post BK asset division, etc. Selling the home might be an option, but you really don't have much of a say because ultimately the mortgage company would have to approve and sign off on such a sale; in essence it would be a short sale.

As far as exempting the home out of your BK, that is not what actually happened. The debt was discharged/wiped as well as removed from your credit file (as you stated). Unless you legally reaffirmed the mortgage note and signed a bunch of paperwork that was recorded in your county recorder's office, just walk away and let your soon to be "ex" deal with it.

I would expect that once the housing market continues to turn around in the next couple of years, your mortgage company will foreclose and then sell the home to either break even on the note, or even make money; you and your "ex" can do nothing about it unless the debt is legally reaffirmed. Your "ex" is sounding like and/or thinks he can have his cake and eat it too....pay if I want, or not pay...ideal situation. If this was a normal economy and housing market, your house would have foreclosed and sold long ago.

If it were me, I would just file my divorce, and let the attorney deal with what you can actually walk away from. You got a new start financially when you received your discharge, now get a new life start and just leave that mess behind.

 

[bigun]

Just get on with the divorce and forget about the house.
You can put anything you please in the divorce decree about refi'ing the home but, with a shakey income and a fresh bk on his credit reports and maybe no equity or minimal equity odds are, he'd get turned for a refi loan.