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What you should know about bankruptcy and divorce

In an effort to live the American dream together, many couples in Ohio enter into mortgage agreements without giving a thought to the chance of the end of a marriage. Upon divorce, however, removing one's legal obligation to a mortgage may be easier said than done. While a divorce may grant one party ownership of the home, the lender may still hold both parties responsible for the debt.

With the start of a new life after divorce, one or both parties may decide to seek bankruptcy as an option to begin anew in regard to financial matters in their life. Even though a home may have been granted to the other party as part of the divorce proceedings, the party filing bankruptcy might want to consider including it in a personal bankruptcy.

Including a mortgage in a bankruptcy would simply remove the filing party's liability on the loan. While the individual would no longer be responsible to re-pay the loan, the mortgage company is not obligated to remove their name from the deed. As long as payments continue to be made, the home is safe from foreclosure. However, should foreclosure occur, an individual who previously filed bankruptcy and did not reaffirm on the loan may continue to be responsible for the debt. Reaffirmation of the loan, however, would reinstate one's liability, and is one of many things to consider when making decisions during a post-divorce bankruptcy process.

A family law attorney may be able to help divorcees to make the right decisions to protect their interests following a divorce. While there are many personal matters that need to be settled during the divorce, the decisions that are made regarding finances may continue to affect individuals for years after the divorce decree is signed. An attorney may be able to offer the advice needed in order to make the right decisions.

Source: Fox Business, "How Does Divorce Affect Bankruptcy and Mortgage?", Justin Harelik, July 03, 2013

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