Options When Faced with Foreclosure During Divorce


When people marry, it’s traditional for couples to purchase a home as a celebration of their union, and as a way to start acquiring assets (investments). Often, they’ll take out a mortgage together and they’ll both be on the title to the property. However, if something happens, for example, if one of the spouses loses their job or if their business closes down, or if the value of the home plummets because of an economic recession, and the couple files for divorce amid all chaos, matters can get complicated.

If you’re struggling to pay your mortgage or if you’re way upside-down and you’re going through a divorce, you’ll want to consider the options available in regard to your home. Should you sell it, or is that even a possibility? Should one of you keep it? Should you rent it out and wait for the market to turn around?

There isn’t a “one size fits all” answer since each couple’s situation is unique and because the real estate market can be unstable during economic lows, so the best approach will depend on the market and your individual circumstances.

What Are My Options?

Before we discuss your options, we have some questions for you and your answers should help steer you in the right direction:

  • Is your house upside-down?
  • Does either spouse want to keep the home?
  • In the current market, can the house be sold at a profit?
  • Can one spouse assume the mortgage?
  • Can one spouse quality to refinance the mortgage?
  • If refinancing or assuming the mortgage are not options, would a loan modification be a viable alternative?
  • Are you willing to continue owning the house together, but rent it out?

When a couple is divorcing and facing foreclosure, their options usually include selling the house, refinancing, one spouse assuming the mortgage, renting the house out, filing bankruptcy (not always wise during a divorce because it can delay it), and walking away from the house and letting their credit take a hit, a hard hit.

If you’re divorcing and your home is facing foreclosure, we recommend discussing the details of your situation with an attorney from our firm. This way, you can make an informed decision that is in your financial best interests. Since homes can be significant assets, it’s important to carefully evaluate all of your options before pulling the trigger on any one of them.