Lien & Mortgages During Divorce
All mortgages are liens, but not all liens constitute mortgages. A mortgage is an installment loan secured by a lien on real property, whereas a lien is a security interest in real or personal property. Typically, a mortgage on real property is voluntary, whereas a lien is involuntary, arising when the owner owes a debt such as taxes or a judgment. Mortgages and liens can be marital debts in a divorce case.
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Marital Debt Divison Generally
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Marital debts, like marital property, is divided under state laws that fall under the classification of either equitable distribution (ED) or community property (CP). The main difference is that CP courts divide marital estates equally, whereas ED courts divide them equitably, or fairly. Fair doesn't always mean equal, so ED law contains a list of factors that allow for an unequal division in certain cases. In either type of state, marital debt typically consists of all debt acquired by either party after date of marriage and before either date of separation or another date set forth in state law. Mortgages and liens on real property can be either marital or separate debts.
Marital or Separate Debt
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A lien on real property will constitute marital debt to the extent the obligation it secures is marital debt. A lien arising out of a debt for unpaid taxes during marriage would be one such example, as would a judgment against a party for money owed on a medical or credit card bill incurred during marriage. The lien would be marital and therefore divisible by the court even if the property it has attached to is separate. A mortgage can also be marital or separate. If a party mortgaged property before marriage, it will be a separate debt. If the parties bought a house during marriage, the mortgage will be marital debt.
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When Separate Debt Affects Marital Property
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In some states, parties can hold real property as tenants by the entirety. This has several implications, but one of the most important is that judgments and other debts bounce off the property and do not attach as liens. If a husband and wife hold the land as tenants in common, however, a judgment against either party attaches to the land. Although it only attaches to the debtor's interest, the creditor can force a sale of the property to recover the debtor's part. The existence of such a lien can make it difficult or impossible to sell the former marital residence.
Who Pays During a Divorce Case
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A party will generally be required to pay his own separate debts during the progress of a case, but there may be a period of time during which the parties cannot agree on whether the debt is marital or separate. With debt that both parties know is marital, the parties may disagree on who has to pay it pending distribution by a court. Where these disagreements exist, courts will sometimes enter temporary orders directing one party or the other to service the debt pending a final decision on property and debt distribution.
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References
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