Dear Bankruptcy Adviser, I am divorced, and my ex-husband is on the deed to the house. I am unable to refinance my home, which was given to me through the divorce. Can I file bankruptcy, and would the bankruptcy judge order the lender to get his name off the mortgage? -- Sheila
Dear Sheila, I wish this were an option for you, but the bankruptcy judge does not have that type of power.
You finalized your divorce with a divorce decree or a formal document ending your marriage. The divorce decree is executed through the family law court and is a court's formal order granting a termination of marriage. In general, the judge in a divorce issues a judgment for the dissolution of marriage, and the judgment is confirmed when the decree is signed and dated by the judge and court clerk. Each state may have different names for this type of decree.
You need to understand one harsh truth: Your creditors are not part of your decision to get divorced, even though debt might be one of the reasons for your marital friction. Through your divorce, the debt may be divided between you and your husband, but that does not mean liability for the debt is magically lifted. It only means one spouse has agreed to take responsibility to pay a debt. And the creditors do not care who it is as long as payments are still received.
The divorce decree does provide some protection. In the event that your ex does not uphold his end of the agreement, you are able to bring him back into court and demand he comply. For example, if your ex agrees to pay all credit card balances but fails to adhere to that agreement, you can bring him back into family court, garnish his wages or levy his bank accounts for failing to comply with the court order.
In your case, a family law or bankruptcy judge cannot order a lender to refinance your mortgage. Your current lender or a future lender must make that decision. The potential loss of half of the household income will make refinancing that much more difficult. You would have to qualify based on your credit, equity in the property, your income, and maybe some spousal or child support.
The bankruptcy would also not remove his name from the mortgage; it would only eliminate your possible liability for the mortgage in the event you decide to walk away from the property. Depending on the state in which you live, your ex could still remain liable for the mortgage even after you complete your bankruptcy.
At this point, you and your ex-husband are still connected by this mortgage. The property equity should eventually return, your credit will recover after a bankruptcy, and at that point you can refinance the mortgage to remove his name from the loan and title. Until then, no one can demand that that lender remove his name or that the lender refinance your loan.