What would be a fair property settlement in a divorce where you owe more than the house is worth?

Dividing property is one of the most important decisions during the divorce process.  In deciding what happens to the house, some of your choices may include:

• Selling the house prior to the divorce
• Selling the house shortly after the divorce
• Agreeing to sell the house at a future date and maintaining a joint interest in the house
• Transferring title to one of the parties as part of the divorce settlement

It is becoming commonplace for people to sell their homes for less than they owe on the mortgage, which is known as a “short sale”.  Before you put your house on the market, it’s best to talk with a tax advisor.  It’s possible that the IRS will consider the difference between the value at which you sell your home and the mortgage balance as “income” on which you will have to pay taxes.  If you intend to keep your home and exonerate your spouse from future mortgage payments, you will have to refinance the home with a new loan under your name only. 

Should you decide to sell the house and end up getting less than you currently owe, the remaining debt will have to be split between both parties.  Whatever you decide, it’s always best to get advice from an experienced family law attorney.

Talk to a Divorce Lawyer to make sure your rights are protected during divorce.