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Home Ownership and Divorce: An Interview with Johnathan Charnitski of The Walters Law Firm

By Johnathan Charnitski

Tell us a little bit about your firm and the areas of law that you practice.

The Walters Firm is a boutique general services firm in East Austin. In addition to divorce and family law matters, we handle business law and general litigation matters with a focus on working closely with and being accessible to our clients.

What are the main options for homeowners who are going through a divorce?

Generally speaking, one of four things happen with a home, but there are a multitude of ways to address a home that is community property during a divorce. Every case is going to be a little bit different with respect to the personal preferences of the parties, their financial capabilities, and willingness to take or let go of the home. A good lawyer can get fairly creative in order to meet the needs of individual clients depending on their circumstances. I always highly recommend that individuals consult their attorneys to determine the best course of action.

If the mortgage on the home has been paid off and there are no liens against the property, one party may take the home as part of an agreement or by court order. In such a case, the party who is not awarded the home frequently receives a disproportionately large share of the remaining assets to offset the value of the home.

Most of us don¹t own our homes free and clear, however, and a mortgage company is under no obligation to release the non-owner from the original mortgage. In such a case, if the party who is awarded the house is able, we may use a provision in the divorce decree requiring that party either to refinance the mortgage on the home in solely his or her name within a certain period of time or to sell the home and split the proceeds according to agreement or order.

Where the party who is awarded the house is not able to refinance because of credit issues, insufficient equity in the home, or insufficient income, we may have the party who is not awarded the home transfer title to the opposing party (who is obligated by court order to pay the mortgage) and in exchange, the party not awarded the home receives a Deed of Trust. The Deed of Trust allows the party not awarded the home to force sale of the property in the event that the party holding title does not make timely payments on the mortgage, which remains in both parties¹ names. Such an arrangement, however, creates liability and the potential for unwanted ongoing attachment to an ex-spouse for the party who does not hold title to the house.

Frequently, where none of the above options are available or the parties can not agree on how to handle the home, attorneys will recommend instead that the parties simply liquidate the house and split the proceeds according to agreement or order of the court. There are other solutions as well, but these four are the most common.

How would you recommend that people in this situation decide whether to keep or sell their home?

Consult with your lawyer. As I mentioned above, every situation is different and depending on the parties¹ individual financial capabilities, credit, desire to stay in the home, need for immediate cash, and ability to get along and continue financial transactions with their soon-to-be exes, situations that appear very similar on paper may have significantly different solutions in practice ­ and your lawyer may have a less common solution that I have not listed above.

What are some of the biggest challenges that homeowners face during a divorce?

In my experience, the two most important questions to ask yourself as a homeowner going through divorce are, ³Can I afford the home?² and ³Do I WANT the home?²

From a financial perspective, you have two folks who are accustomed to depending on one another for the necessaries of life and who now need to figure out how to make things work on their own. For the party awarded the home, the costs of things like child care, replacing the necessary personal items awarded to the other spouse in the divorce, and paying all of the mortgage and everyday bills instead of half can be daunting. Moreover, those costs can be difficult to fully assess until you have started paying them, but by then it may be too late to change your mind. I frequently have my clients compile a budget of expenses spanning several months or a full year to help assess what their individual costs of living will be going forward and use that to try to determine whether they can afford to keep their homes on their own.

The second consideration is whether an individual, even if he or she can afford it, really wants to stay in the home. For the great majority of us, a home is a place in which we have invested more than money and filled with more than stuff. Staying in a home where there is significant emotional baggage may make it difficult to move on from the marriage and to start fresh. That feeling of not wanting to go back to a particular place can be a powerful thing and one I always recommend clients respect. If it doesn¹t feel like home anymore, then it may be best not to make it the place you sleep every night.

Are there circumstances when it would be best for people to sell their home and start looking for a new place to live?

Absolutely. As I mentioned above, even with the best of planning, the financial burden might become overwhelming, or a place in which you thought you¹d be perfectly comfortable keeps dredging up bad memories. Even if you were awarded the home in the divorce and decide later you do not want to keep it, you can speak to a licensed real estate agent and use the proceeds from the sale of the existing home to help you find a place to begin the next stage of your life.

From your experience, do you have any advice for recent divorcees who need to buy a new home?

First, make sure you¹re working with your attorney to ensure you have filed all the appropriate documentation during the divorce. I get a lot of calls from individuals who transferred their houses to their exes during their divorces without ensuring they had recourse if the ex-spouse stopped paying the mortgage bearing both parties¹ names. Their credit scores may have suddenly tanked for failure to pay mortgages they had with ex-spouses as long as 10 or 15 years previous. Unfortunately, if they did not set up the proper recourse in such a situation, they are frequently stuck.

Second, watch your credit like a hawk. The three reporting bureaus are each required to provide you a free credit report once yearly at your request. I recommend people take advantage of the service generally, but especially if you are recently divorced. If you and your ex-spouse had significant debts, a credit monitoring service might be a good option as well to ensure that all the debts that were supposed to go to your ex-spouse were successfully transferred and any lingering mutual obligations are paid timely. There are few things worse than knowing that you are responsible with your money and pay your obligations on time, only to find out when applying for a car or a home that you cannot obtain a loan because your ex-spouse has ruined your credit. If you find a problem on your credit report after a divorce, contact your attorney ­ he or she will be able to help you enforce provisions in your divorce decree if need be.

What¹s the best way for people to contact you and your firm?

Phone or email is the best way to contact us ­ we have a great front office staff who are always willing to help guide potential clients to the attorneys best suited to help them. You can also visit us on the web at eastaustinlawyers.com

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