Divorce And Foreclosure - Making Payments Can Be Difficult
A divorce and foreclosure occur when a husband or wife files for divorce and the court accepts the divorce papers. The court then issues a divorce decree and lists the names of both parties as the plaintiff and defendant. The name of the creditor is also listed on the divorce decree along with the address of the creditor. It is then left up to the spouse to either pay off the debt and keep the house or sell it off at an auction and buy another home. In some states, the defaulting spouse is still responsible for the mortgage if they refuse to make payments.
Since the house is sold at an auction after the divorce and foreclosure process, the mortgage must be paid first. Just because the house has been given to one of the parties in the divorce does not always mean that the creditor will immediately transfer the loan to that party. If either spouse does not pay the mortgage after divorce then the bank will begin foreclosure proceedings on both parties. The house can then be taken by the lender and sold to recover the lost money. This is called "pre-foreclosure".
If one spouse does pay the mortgage after divorce and foreclosure then the bank has no choice but to try and repossess the house through legal proceedings. This is called foreclosure. If both parties are willing to settle the debt and pay off the house then a compromise agreement can be made. The compromise agreement may be in the form of a partial monthly payment. In this case the creditor will take less money than what is listed on the mortgage and the balance of the debt will be repaid to the creditor. There will be additional payments made from the monthly proceeds.
If one spouse files for bankruptcy then it is possible that this can stop the bank from pursuing foreclosure. This is especially true in the case of a spouse who has a small amount of equity on the home and who could easily avoid foreclosure by selling the home. However, even if the equity does remain the creditor will still proceed with the process of taking the house through legal proceedings. There will be an evaluation of the value of the property and a calculation of how much more the person owing the money will have to pay. It may be wise to consult with a bankruptcy attorney if this is the route that one wishes to take.
A divorce and foreclosure can make the lives of those involved very stressful. This can make it difficult to find a new job or to get a new lease on a home. Some people opt to rent an apartment or lease a residence during this time. Others sell the home. It is important for those involved to work out a payment plan that will allow both to get out of debt and live a normal lifestyle.
There is an option available for those who are having a divorce and foreclosure on their minds. A mortgage loan modification is available to help those who need it. The lender will work with the homeowner to come up with a plan that will allow the homeowner to repay the loan while working with the spouse to find another solution. This can be accomplished by working with a counselor, with a real estate agent or even by working with the spouse directly. The goal is for both to reach a mutually beneficial resolution that allows both to move on with their lives.