If you are involved in a divorce, and if you decide you will let your spouse keep the house, here is an important consideration that many people don’t know. Make sure you know whether your name is on the promissory note that financed the purchase of the home. And, DO NOT, convey your interest in that property to your soon-to-be ex spouse without either he or she refinancing the promissory note to get your name off of it or some very tightly drafted, binding agreement that he or she will refinance that promissory note and get your name off of it in some definite period of time.
It is not enough for you to execute a quit claim deed and convey your interest in the house to your soon-to-be ex spouse. All that does is vest the complete title to that property in your ex. The creditor on the promissory note is unaffected by that conveyance and can enforce the obligations of that promissory note against you as a party to that contract (promissory note). The creditor is a third party whose rights are unaffected by the conveyance between you and your ex.
If you do not get your name off of that promissory note, your ex spouse’s future payment perfomance on that note will end up on your credit report and it can destroy your credit rating if he or she does not make payments on time. Also, your obligations under that promissory note will be included as a liability if and when you ever apply for a loan in the future. In other words, your obligation on that promissory note will be a part of your debt to earnings ratio when you apply for credit in the future. This can interfere with your ability to qualify for future loans.
These negative results can all be avoided by simply getting your name off of the promissory note. Insist that your divorce attorney make this happen, or sell the house altogether and divide the proceeds. But, whatever you do, get your name off of the promissory note if you don’t keep the house as a result of a divorce.
I have been made aware of attorneys in divorces who did not bother to advise their clients of the need to get their names off of the promissory note on the house. The possible adverse impact can affect their former client for years and years. This level of incompetence is really out there and you must protect yourself. I hope this little bit of information might be helpful to someone.