Divorce with house underwater

[Anonymous]

Has anyone successfully divorced with their house significantly underwater? How does it work? Neither of us can afford to keep the house.

[Anonymous]

It's no different then if the house had positive equity.
The "proceeds" from sale of house are added into the total joint assets that are being split through divorce.
In your case, that amount is a negative number so it reduces the amounts being split.

Basically each spouse gets their fair share of the debt.

[Anonymous]

This sounds like good grounds for a short sale.

How underwater are we talking here?

If it is not much and rent will cover the mortgage, you might rent it for a few years.

[Anonymous]

You both will split the debt -- just like splitting the assets.

[Anonymous]

Yep. We had to take out a loan to cover the loss and split the loan 50/50.

[Anonymous]

Sorry to hear about your problem. You have a couple of options. You can sell the home and bring the cash needed to the settlement table if you're financially able.

Otherwise, you can do a short sale. Divorce is an acceptable reason for banks to approve the sale for less than what is owed. If you elect to proceed with a short sale, both parties must be willing to cooperate and provide all needed information. I wrote an offer on a short sale and within two weeks, the listing agent couldn't get both parties to even sign off on the offer. Obviously, that property will likely end in a foreclosure. The bank will review the all your financial assets to ensure you're not holding out on them.

I would recommend against renting as you would be tied together until the eventual sale. This would make the divorce settlement more complicated and potentially create additional legal issues down the road. Don't think your attorney would endorse the rental option.

[Anonymous]

OP, to get better advice why don't you also post this in the Money & Finance Section? People in that forum can give you more specific financial advice there.

Sorry this is happening to you.

[Anonymous]

Thanks everyone. We are going to try and stick it out for a while longer. If the marriage still sucks by this time next year, at least it won't be such a clusterf*ck financially. Some of the debt is due to a home equity loan but a lot is just post-recession drop in value. Still hoping for a rebound I guess. :-/