Articles Posted in Divorce and The Marital Home

Since the 2008 mortgage crisis New Jersey home values have taken a substantial hit, losing approximately one-third of their value in some communities. Over the past couple of years values have been on the rebound. However, the pace has been very slow.

If you’re going through a divorce, your home has negative equity, you are behind in mortgage payments, and a foreclosure is on the horizon what are your options for the house, and what is your smartest move?

If You Want To Keep The House

If you want to keep the house one option is to seek a loan modification from your bank. In this scenario you will ask your lender to take the total amount of the late mortgage payment balance and roll it into your loan – basically extending the term of your loan. This may allow you to hold onto your house and wait for its value to rise over time. Another option, if the circumstances make financial sense and your spouse is on the loan with you is to attempt to assume the loan in your sole name. A third option which involves you keeping the house is to refinance the property to remove your spouse, roll the overdue mortgage payments into the refinance, and hopefully lower your interest rate and payments. Each of the above scenarios involve you carrying potentially heavy debt. As I stated in my previous blog post entitled Right To Stay in The House After Divorce In New Jersey( hyperlink) there are a number of questions that you should ask yourself to determine whether it makes financial sense to remain in your home (whether it has positive or negative equity). If, after answering the questions you decide that it makes financial sense to stay in your home, you can pursue a loan modification, a loan assumption (if your bank offers this option), or a refinance.

If You Decide To Leave The House

If you decide that you will be leaving the house, you have a few options on how to leave. You can opt for a short sale or you may attempt to transfer the house back to the bank in a process called a deed-in-lieu of foreclosure. Alternatively, if the bank is not receptive to a deed-in-lieu or foreclosure or a short sale, you may have no choice but to let the house go into foreclosure. Continue reading →

The IRS treats canceled debt as income. This means that when a creditor cancels or forgives debt the amount of the canceled or forgiven debt is treated as income to the person forgiven.

For example, if you and spouse settled joint credit card debt for less than the amount owed you will receive a 1099 reflecting the amount forgiven. Similarly, if you sell your home as a short sale, sign a deed in lieu of foreclosure, or have your home foreclosed upon you may receive a 1099 for the amount of the debt that was forgiven.

The following example will help illustrate how canceled debt operates in the context of a short sale. If a husband and wife sell their house at a short sale for $385,000 but they owe $485,000 on the mortgage, the canceled debt is $100,000. While the bank is forgiving the $100,000 shortfall, the IRS is treating the $100,000 canceled debt as income to the husband and wife. The IRS learns about the canceled debt because the bank sends you and the IRS a Form 1099 which reports the amount of canceled debt. Having received the Form 1099 notice of canceled debt from the bank, the IRS is expecting you to report and pay taxes on that canceled debt. Continue reading →

A recurrent situation is where the parties to a divorce decide that one party will remain in the property after the divorce and they have to get the other party’s name off of the deed and/or the note and mortgage.

Here’s How To Remove Your Ex-Spouse From The Deed

To take your spouse’s name off of the deed you have to execute a new deed from you and your spouse (as grantors) to you (as grantee). This keeps the chain of title intact. Once you and your spouse have signed this new deed it has to be recorded with the county clerk in your county. Now the chain of title will show that you and your spouse purchased the property in a certain year and then you and your spouse transferred the property to you on a certain date. The mechanics of the transfer are very straightforward. This deed is called a quitclaim deed. It is often mistakenly referred to as a “quick claim deed”.

Attachments to Deed

There two other attachments that need to be filed along with the deed in New Jersey. The attachments are: (1) The Seller’s Residency Certification/Exemption (GIT/REP-3); and (2) The Affidavit of Consideration. If you are also refinancing the property your lender may prepare this paperwork for you. Check if your lender if they will take care of preparing the deed and attachments or whether they want your attorney to handle deed the transfer paperwork. If you are not refinancing the property then you can contact my office at 201-731-3086 to accomplish the deed transfer for you.

Affidavit of Title and Title Search

Your ex-spouse should also sign an affidavit of title regarding the property. The affidavit of title is a standard form affidavit in which your ex-spouse  certifies in writing under oath, in front of a notary, that he or she has not done anything to have a lien placed on the property. The affidavit of title protects you so that if, after the title transfer, an issue pops up on title connected to your spouse you have an affidavit from them that you can utilize if you have to go to court to force them to remove the lien. Continue reading →

The following scenario plays out quite often as a couple is divorcing:

Wife has primary custody of the children and she wants to remain in the house after the divorce so that the children can maintain some stability, finish high school and graduate with their friends. Husband wants to sell the house and either receive his share of the equity and/or release himself from the burden of the mortgage. Who prevails when the couple has these competing interests?

Generally speaking if the children are within a few years of graduating from high school the parent who has primary custody of the children will be able to remain in the house until such time as the children graduate and go off to college. The thought is that in balancing the husband and wife’s competing interests the children’s best interests trump the husband’s desire to immediately get his money and get his name off the mortgage.

Of course, the parties can agree on any arrangement that they want. However, if the parties cannot agree there is a recognized preference to let the high school age children finish off their careers in their house.

If there are no children, custody is not an issue, and therefore both parties will have an equal right to remain in the house after the divorce. In this situation if the parties cannot agree on who will remain the house will be listed and sold, and the parties will split the proceeds, or alternatively, one spouse will buyout the other spouse’s interest in the property, usually through a refinance. Continue reading →

Once you have determined who owns the marital real estate, the next question is whether there is equity in the property to be distributed. Equity is the monetary value of the property if it were to be sold. A few examples will illustrate the concept of equity:

Example 1:

Husband and wife own a home worth $500,000

The bank is owed:$300,000

The equity To Be Distributed is:$200,000

If the property is sold Husband will receive $100,000 and Wife will receive $100,000.

 

Example 2:

Husband and wife own a home worth $300,000

The bank is owed:$300,000

The equity To Be Distributed is:$0

If the property is sold Husband will receive $0 and Wife will receive $0.

 

Example 3:

Husband and wife own a home worth $275,000

The bank is owed:$300,000

The equity To Be Distributed is:-$25,000 (negative equity)

If the property is sold Husband will owe $12,500 and Wife will owe $12,500. Continue reading →

A divorce or separation rarely starts off in a clean, orderly fashion. Once the relationship begins to deteriorate there is often a messy period where the parties rights and options are sorted out. Who stays and who goes, and on what timeline? Who pays for what expenses? Who keeps what? These are the basic questions that have to be answered.

The law in this area is straightforward. The parties are supposed to maintain the financial status quo as their case progresses and they attempt to settle their issues.

Housing-Related Expenses

One of the biggest questions to be resolved is how are the housing expenses shared during the break up. Generally speaking, if you were contributing 25% of the mortgage or rent expense on a monthly basis before the separation or divorce began, you will be responsible to continue to contribute 25% during the separation or divorce process. Unless the parties agree, one party cannot move out and say to the other party, “I’ve got my own rent and utilities now, so you’re on your own to figure out how you pay your housing expenses.” Even though you are in the middle of a break up, housing expenses have to be paid as they were before the break up. Practically speaking this is a tough position to be in for the person moving out of the home.

For example, let’s say husband moves out of the house during the divorce and does not return. When he goes out and tries to rent an apartment he has to come up with the security deposit, first month’s rent, and broker fee. Then he has moving expenses. Assuming that he settles into an apartment he has rent, utilities, and all of his other individual bills to pay. However, according to the law he still has to contribute his portion to the housing expenses at the home where wife is residing. Unless his cash flow situation is very favorable he will be stretched to the financial breaking point as he is paying a housing expense at two separate residences. Unfortunately for him the courts generally hold him responsible to contribute to his marital expenses ahead of his own personal living expenses. Continue reading →

If you are contemplating a divorce or separation one of the trickiest issues to navigate is who will stay in the property while the divorce is being worked out and who will go. If you can agree on who will stay and who will vacate, and you can agree on how you will handle the household finances during the divorce, then you have resolved what is oftentimes a major hurdle in the divorce process. Similarly, if you and your spouse can live in the same house together while going through a divorce then you are in a very good position to get your case settled.

This blog post concerns the situation where the parties cannot live together while the divorce is being worked out. If you find yourself in this situation, and you need help figuring out your next move, do not hesitate to contact my office at 201-731-3086, or via e-mail using the e-mail contact form found on this page.

At the outset, it should be noted that if the property that you live in is jointly owned neither party has a greater right to occupy it during the divorce. It should also be noted that even if the property is solely owned by one party, that party does not have the right to eject or remove their spouse from their property. Once you are married there is a right to joint possession of the marital home until a divorce is granted. Because neither party has the right to unilaterally remove the other party from the property stalemates can ensue.

Stalemates can arise when one party can’t leave and rent an apartment because they have neither three months rent as deposit money nor good credit. Stalemates can also arise when there is no alternative place to reside, even temporarily – family is not local, and imposing on friends would be too burdensome. Additionally, if one of the parties is not employed they have no chance to go out on their own unless and until they receive some form of support if it’s warranted. Continue reading →

One of the biggest issues in any divorce or separation is what will be done with real property – a house, a condominium, even a rental unit. The common issues to be resolved are: Who gets the property during and after the divorce? Who is responsible for paying the mortgage and real estate taxes? Is the property sold to a third-party, or can one spouse buy out the other’s interest?

With the post-2008 housing meltdown issues involving underwater homes, short sales, foreclosures, insolvency, cancelled debt income, and exposure to deficiency judgments have become part of the divorce landscape.

The purpose of this blog post is to help potential clients living in the Bergen-Passaic and Hudson-Essex areas understand how the New Jersey real estate and divorce laws impact ownership and occupancy of their marital real estate. This post is the first in a series of related posts dealing with the topic of divorce and the marital home. As always, your questions are welcomed by telephone at 201-731-3086 or via e-mail using the contact form on this page.

The Deed

When you acquired your residence you received a deed at closing. The deed is the document that spells out who has ownership rights in your property. If you don’t have a copy of your deed you can always get a copy from the County Clerk in your county of residence. If you live in Bergen County you can get a copy of your deed at the Bergen County Clerk’s Office, located at One Bergen County Plaza, Hackensack, New Jersey 07601. If you live in Passaic County you can get a copy of your deed at the Office of the County Clerk/Registry Division, Passaic County Administration Building, 401 Grand Street, Room 113, Paterson, New Jersey 07505. Hudson County deeds are available at the Hudson County Register’s Office, 257 Cornelison Avenue, 4th Floor, Jersey City, New Jersey 07302. Essex County deeds can be obtained from the Essex County Register of Deeds located at Essex County Hall of Records, 465 Martin Luther King, Jr. Boulevard, Newark, New Jersey, 07102. Continue reading →