Bankruptcy and Divorce: Can the Lender Be Forced to Remove an Ex’s Name from the Title? - Westgate Law

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Bankruptcy and Divorce: Can the Lender Be Forced to Remove an Ex’s Name from the Title?

Many individuals find themselves wishing there was a magical method to force a lender to remove an “ex’s” name from the deed to a house post-divorce. They find themselves unable to refinance even if the home was given to them as a part of the divorce decree. Some assume that they should be able to file for bankruptcy and have their bankruptcy judge simply “order” the lender to remove the name of their ex from the mortgage. It seems logical. Sadly, it’s not a viable option when dealing with bankruptcy and divorce.  The bankruptcy judge doesn’t have that kind of power.

When a couple gets divorced, it is finalized by a divorce decree or a formal document that ends their marriage. The decree is executed through family court and is the final, formal order that grants a termination of the marriage. The judge handling the divorce issues a judgment for the dissolution of marriage. The judgment is confirmed when the judge and the court clerk sign and date the document. (This type of decree could have a different name depending upon your state of residence).

The simple truth is this: Your creditors are not a party in your divorce.

Your debt/financial discord might be one of the major reasons behind the marital friction leading to your divorce. Your debt can be divided between you and your ex in the course of your divorce. But it all boils down to one thing…liability for debt is not magically lifted. One spouse can agree to take responsibility for a debt, but the creditors don’t care. They simply want their payments.

That said, the divorce decree does provide you with some protection. If your ex doesn’t stick to the agreed upon financial arrangements as laid out in the divorce decree, you can take them back to family court and demand compliance with the agreement. The court could then decide to take action, such as garnishment of wages, levying bank accounts, etc.

In the case of a home being awarded to one party, neither the family law or bankruptcy judge has the power to order a lender to remove the other party’s name or to refinance the mortgage. The lender makes these decisions. In fact, the removal of the ex’s name would often make refinancing drastically more difficult than might be expected as it cuts the amount of household income being considered during the loan process drastically – making refinancing that much more difficult. Qualifying for refinancing would have to be based on your credit, your equity, and your income (plus any spousal or child support).

If you declared bankruptcy, your ex’s name would still not be removed from the mortgage. It would only provide you with the opportunity to eliminate YOUR liability for the mortgage in the event that you decide to walk away from the property. In some states, your ex could still be held liable for the mortgage even after you declared bankruptcy and received your discharge.

A mortgage is a lingering connection between you and your ex. No one can demand that the lender remove an ex’s name or refinance the mortgage. You may simply have to wait it out: wait for the property equity to return, wait for your credit to recover post-bankruptcy, etc. If you’d like to hear more about the benefits of declaring bankruptcy post-divorce, contact the southern California bankruptcy experts at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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