A common part of a settlement agreement with divorce is the division of the homestead. Real property is considered marital if it was purchased during the marriage, regardless of whose name is actually on the title. In addition, if one party purchased the home prior to the marriage, the other spouse is entitled to some of the equity in the home that was gained during the time of the marriage. How much that equity amounts to in this economy is a different matter.
Refinancing and Credit
When parties divorce, the home is either ordered to be sold or is awarded to one of the parties. The agreement does not always specify that the party keeping the home should refinance, however. What happens then? Does this affect the other spouse’s credit?
The answer is it very well can have an impact on your credit. If you are the spouse walking away from the home and your ex does not plan to refinance, the mortgage company is still able to come after you for any of the unpaid mortgage if your ex does not pay on time. The mortgage company can report this to the credit bureaus, which will have an effect on your credit score. Your recourse at that time is to make a payment and then sue your former spouse in court.
There is no recognized legal right to sue based on damage to your credit score. If you are not able to make a payment on the mortgage, you may be left with no recourse, even though your spouse assumed the entire payment. This is why it is important to know what your final divorce agreement says and speak to a lawyer about how that will affect you long-term.