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How to Save your Home while Legally Separated

If you’re going through a divorce, odds are that you already have a lot on your plate; but when a home is involved, things can get even more complicated. It is likely that before the divorce proceedings began, at least one partner has vacated the home- adding another residence to be supported with less income than before. Divorce proceedings can be lengthy affairs and in the meantime, foreclosure becomes a likely condition.

One of the first steps in this situation is to determine who, in the eyes of the bank, is legally responsible for the loan. In some cases, both parties signed the mortgage documents and can both be held liable for the debt. In other cases, only one spouse signed the documents, leaving them solely liable. It is important to determine early in the proceedings if one party will be assuming responsibility and possession of the home, or neither. Once this decision has been agreed upon, there are several options for moving forward.

If one party will be assuming responsibility and possession but is not the sole signee of the loan documents, there are several options. One party can assume responsibility of the mortgage through the bank. They will still be required to show an adequate income to the bank, but no refinancing or adjustment to the loan will take place other than a name change. Refinancing the home is another option. A loan modification is an option in situations where the assuming party cannot afford the current payments. Loan modifications restructure the current loan by changing one or more features of the loan, such as interest rate or length of term.

If neither party wants to take possession of the home after the divorce, a short sale or Deed in Lieu of Foreclosure are possible alternatives for the former spouses. Not every situation is identical and what worked for others may not work best for you. When unsure of what steps to take in this process, it is always best to consult with a skilled divorce attorney.