Reader Question: Is a Financially Clean Divorce Possible?

by Kevin on September 2, 2009

A reader wrote in with this question:

I know someone going through a tough time right now.  They were married less than 2 years ago and have decided to get a divorce.
There was no prenuptial agreement.  They bought a duplex right before the marriage.  As far as I know, both of their names are on the mortgage(s).
Yep, that’s plural.  They have an 80/20 two mortgages thing going.   They did deposit $11,500 on the house, which was a gift from the wife’s parents.
The wife also paid off the husbands car and motorcycle loans prior to moving in.

The husband has expressed an interested in keeping the house.  The house (you guessed it!) is now worth a lot less than what they owe for the mortgage.  The wife is interested in walking away, letting the husband keep the house or whatever he decides to do with it.  Right now she is just trying to figure out how to remove her name from the mortgage if at all possible.

Obviously these two people need lawyers.

The husband also offered to “let her walk away” from the obligation of paying the mortgage on the house if he could keep their savings (around $6000) and keep the engagement ring (worth at least $5000).   Hopefully the wife will listen to everyone around her, and not accept this “deal”.

From a financial standpoint, what kind of advice would you give to these two individuals?  They are currently still pooling all of their money into a joint account and continue to pay all the bills equally.  This includes house stuff, mortgage, the husbands student loans etc.

We think the wife and husband need to start splitting their money back into private accounts and split the bills 50/50 until a court orders something different.

My friend cannot be the only person going through a divorce whose house is now worth less than the mortgage, I wonder how other couples are dealing with this kind of issue.

Let me start by saying that this is definitely not an area of expertise for me. I’m not a divorce lawyer. I’m not familar with how divorces typically work, how things are split up, etc.

Additionally I would tell them to seek counseling. It is none of my business, but divorce is costly and in my opinion very sad. In strictly a financial sense a renewed marriage would likely be much cheaper! I would highly recommend they watch the fantastic movie Fireproof or perhaps read the book The Love Dare.

I have also heard that an uncontested divorce (where both parties agree they no longer want to be married) is much less expensive than a contested divorce. This makes sense — if someone wants to divorce you and take half of your stuff, and you don’t want to get divorced… you are going to fight it. And fighting gets expensive.

Two Individuals in One House

Aside from that I would agree they should start living as individuals again. Her income is her income. His income is his income. Splitting the shared bills seems reasonable as well. I would caution on the bills though — if there is something she cannot live without that has a monthly payment, but he has no use for it, she should pay for it on her own. The same would apply to his hobbies as well.

For example if she is in a book club that is $10 per month and he is in a car club that is $30 per month… they should take care of those costs on their own. I would also imagine this would cause some fights, but to me it makes sense to only split things you both get equal value from — utility bills for the home, the mortgage payment, etc.

Of course when you do this there will inevitably be someone who makes less who is likely to be impacted more. (That’s why staying married makes great financial sense.)

The House Issue

In regards to the duplex I honestly have no idea. Should he be allowed to keep their savings and her ring? Should she allow him to assume the full debt of the mortgage?

A part of me thinks it makes sense that if the value of the home has dropped $22,000 or more then that seems like a fair trade. She is essentially paying off her half of the reduced value of the home.

It could be argued that she, through her family’s generosity, paid the down payment plus paid off some of his debts. So to ask her to sacrifice the $11,000 in savings and ring would be putting all of the financial cost on her.

At the same time those things are sunk costs. You can’t get the down payment back now.

I’m Stumped

On only my second reader question I’m stumped. I honestly don’t know what to say here. Divorce is not my area of expertise and the devalued duplex definitely throws some complexity into the issue.

What do other readers think? What should this couple do?

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