Mortgages

My Ex Forced Me Into Foreclosure!

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A reader wrote us with a question about how to get a foreclosure off her credit reports. She described some unusual circumstances that forced her into foreclosure. Even so, most questions we receive offer lessons that others can learn from, and this one is no exception:

Q: I am currently going through a divorce. I found out in 2010 that my husband was not paying the mortgage (both our names on it) since Aug. 2009. I have tried contacting the bank to put it up for short sale since June 2010 as soon as I found out and was served foreclosure paperwork. They told me that without his signature they could not do anything.

In October 2010 we had a hearing, and at court I tried to bring up the issue with the house. My husband had his whole family testify that they were going to bring the (loan) current. The judge gave him more time, and stated that I would sign the home over to him and be free and clear of any debt incurred since 2009. After trying to contact him since the court date through attorneys and being ignored, the house is up for sheriff sale.  He’s made no attempts to bring the mortgage current.

Is there any way to prove to the credit agencies that he purposely ruined my credit by stringing me along? I want a chance to purchase a house like he just recently did—even though he’s in a Chapter 7 bankruptcy! Is there any way to get this house off of my credit?

A: It sounds like you have been put in an extraordinarily difficult situation, but I can’t say it’s terribly uncommon. Unfortunately we see a lot of cases where couples split up and one is supposed to pay the mortgage, but doesn’t. The other spouse ends up with ruined credit and, like your situation, without even a house to show for it!

I am perplexed by what transpired here. The fact that your ex agreed in the divorce proceedings to make the mortgage payments doesn’t release you from the original contract you signed when you took out the mortgage loan with your now ex. You don’t mention what the October hearing was about. Even if the judge did allow your ex to catch up on payments and keep the house, that wouldn’t erase the fact that you agreed to pay the lender in the original note you both signed. So how did the judge release you from any future payments due to the lender on the house?  This just doesn’t sound typical. Where was the mortgage lender when this happened? Were they represented, and did they agree?

As for the credit reporting issues involved, you could try to argue this issue with the credit reporting agencies that this loan shouldn’t be reported under the circumstances. But without some kind of proof that you weren’t responsible for the loan—court documents, for example, stating that you weren’t responsible for the loan after 2009—I think you’ll have a hard time getting them to agree to take the account off your credit reports. The mortgage lender would be in the best position to remove the information about the loan, but again, unless they agreed to release you from the loan, I have a hard time seeing why they would be motivated to cooperate.

It sounds like your ex has now filed for bankruptcy and left you stuck with this loan, and a possible deficiency if the home is foreclosed upon. In addition, you could potentially be responsible for taxes on the cancelled debt unless you qualify for an exception or exclusion.

Have you thought about filing for bankruptcy yourself? Unfortunately, it may be the best way to put this behind you so you can begin to rebuild your credit and buy a home yourself. If you can’t file, or really don’t want to do that, talk with the bankruptcy attorney about options for resolving any debt that may remain once the home is foreclosed upon. And consult with a tax advisor (CPA or enrolled agent) to learn whether you may owe taxes after the foreclosure.

This is not meant as legal advice, and if you are working with an attorney, I recommend you consult with him or her.

Image: respres, via Flickr.com

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