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Deceased Ex-spouse and Mortgage

My ex-spouse died, and my name is still on the mortgage. Do I have to make the mortgage payment?

My ex-husband was awarded the house in a divorce 10 years ago. He died recently and left no will. He never remarried and has no children. I know my name is still on the mortgage although he was awarded the house. My question is what will happen to the house and am I still responsible to pay it off now that he is dead? He has kept up the payments so I'm going to guess that it has some amount of equity so would not be worth less than the loan but I doubt his estate would have enough to pay it off in one chunk.

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You do not indicate whether the financial institution that holds the mortgage has been contacted about your ex-spouse's death. If not, the estate's administrator needs to do so immediately because the mortgagor will be contacting you, as co-signer, for payment upon default.

You do not mention any other lingering debts that occurred during the marriage, such as joint credit cards or a car loan, that could be your responsibility. You did not mention if your name is on the title for the property.

I see the following issues in your case:

  1. Community property issues
  2. Who is responsible for the mortgage (called a "deed of trust" in California)
  3. Responsibility for possible deficiency balance or other debt
  4. Names on the title

Your primary issue is whether you have liability for your ex-husband's mortgage. You do not mention whether the loan was refinanced during or after your marriage. California has specific laws regarding whether a deficiency balance on a mortgage or deed of trust can be collected from the homeowner who defaults (more on this later).

Debt and Death

I surmise you do not wish to possess the property. In cases when there is a death, there are only a few options for lender and co-mortgagor. At death, the lender will either want the mortgage paid in full or the joint mortgagor to continue making payments. Since you are listed on the mortgage, you will be responsible for the payments and any potential deficiency balance regardless of whether your name appears on the title.

If your name appears on the title, and, as you mention, there is no will and your ex-spouse never remarried, it is likely the house became yours at the moment of your ex-spouse's demise.

For more information on debt and death, read the article on Bills.com on Debt Death and Debt Tax; both provide general information on debtors and death. Though your ex-spouse has died, this Bills.com article about removing a name from joint mortgage will provide readers information on what to do in a divorce situation to avoid future debt obligations.

Although your ex-spouse had no will or children, he may still have heirs in the form of brothers, sisters, or parents who have an interest in the estate.

Community Property States

Since you reside in California, a "community property" state, this means that many assets and obligations of one partner created in a marriage become "community" assets or obligations. By extension, this can mean that one spouse can be held liable for many of the debts of the other spouse even if his or her name is not on the accounts which resulted in the debts. The other community property states are Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin and have similar, though not identical rules to the one I just cited.

Creditors and Divorce

A divorce decree is an agreement between two former spouses, but it generally does not modify any contracts with third parties made before the divorce. Generally, if a spouse does not comply with the divorce decree, the legal recourse is to file a lawsuit against the ex-spouse for a breach of contract. The damages would be the amount of any judgment taken against you, if such a judgment occurs. In your case, you ex-spouse died, thus leaving your only recourse to sue the estate if you are deemed liable for any deficiency balance when the home is sold.

One important disclaimer for non-California readers: Community property laws are unique to each state -- no two states share the same laws. The discussion above regarding spousal liability is meant to provide general information about community property as a theory. Your state's laws may vary from the general theory. Therefore, it is important to consult with an attorney in your state who can review the details of your situation and give you accurate and precise advice about your rights and liabilities under your state's laws.

Home Sale Options

If as discussed above you own the property, do not want it, and there is no equity in the property, you should review the federal home sale programs that may be available to you. Bills.com summarized the federal government Home Affordable Foreclosure Alternatives program. This is a must-read article for distressed homeowners who are considering selling their homes.

California Deficiency Balance

When a home is foreclosed upon, the mortgage lender usually auctions the property at a foreclosure sale, applying whatever amount is received at the foreclosure sale to the balance owed on the mortgage. In many cases, the sale price at auction is not sufficient to cover the mortgage and other secured liens on the property, such as home equity loans. The difference between what you owe on the property and what the lenders actually receive is called a deficiency balance.

Under California law, lenders cannot collect on deficiency balances resulting from "purchase money loans." If your first mortgage is the same loan which you and your ex-spouse used to purchase the home, and it was not refinanced, then your first mortgage lender will likely be unable to collect any deficiency balance resulting from foreclosure. However, lenders who provided "non-purchase money" loans, such as second mortgages, home equity credit lines, or refinance loans, are generally able to pursue former homeowners for payment of deficiency balances not covered by the proceeds of the foreclosure sale. So, assuming you did not refinance the first mortgage, you likely do not need to worry about your first mortgage lender pursuing you for payment. However, you will likely be responsible for any deficiency on a second mortgage, home equity loan, or any other obligation secured by the home.

Recommendation

I strongly encourage you to consult with an attorney in your state experienced with community property, estate planning, or debt to help you determine what your obligations are regarding your ex-spouse's home, and your possible ownership interest.

For additional general information, see the Federal Trade Commission documents Paying the Debts of a Deceased Relative: Who Is Responsible? and FTC Issues Final Policy Statement on Collecting Debts of the Deceased.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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2 Comments

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  • BA
    Jul, 2010
    Bill
    Only the most aggressive creditor will attempt collection efforts against an ex-spouse of a deceased debtor. I realize your child and her spouse resided in a community property state, and that the creditors have an argument that an ex-spouse has liability for debts incurred during the marriage. However, it is rare for creditors to make that claim for married spouses who are both living. It is going to be even more tenuous for a creditor to make that claim when the spouses are divorced. Of course, for a more definitive answer consult with an Arizona attorney who has experience in consumer law. There may be case law on this point that contradicts my analysis.
    0 Votes

  • 35x35
    Jul, 2010
    Bob
    My daughter is divorced (2009) and lives in Scottsdale, AZ. On June 18, 2010 her ex-husband, who lived in Mesa, AZ, died suddenly and unexpectedly from a heart attack at age 50. She is now seeking guidance with respect to the fiscal ramifications of the death, in particular how to avoid inheriting her ex-husband’s debts. Financial Considerations My daughter’s ex-husband has a considerable amount of credit card debt (est. $35,000) and has no assets other than an automobile that is valued at less than $3000. Her ex-spouse at the time of death was unemployed and has been for most of the past three years. It is likely that he wasn’t making any monthly payments to creditors for at least the past year. My daughter has approximately $20,000 in credit card debt and she owes approximately $15,000 on an automobile loan. She has always made regular, on-time payments on credit card accounts and the car loan, and her credit rating is excellent. Her only financial asset is money that is in her teacher retirement account; she doesn’t own any property. My daughter has been steadily employed since graduating from college in 1992 and she currently works as a special needs teacher in Arizona, earning approximately a gross of $50,000 per annum. Background My daughter was married in Massachusetts in 1998 and moved to Arizona in 2005 so that her ex-husband could find employment. From 2005 to 2007 her ex-husband was employed selling appliances, mainly to homebuilders. He lost his job three years ago as a result of the slowdown in the housing market. My daughter and her ex-husband have maintained separate credit cards and bank accounts since before they were married. That is, her name has never appeared on any of his accounts and his name was never on any of her accounts. In 2008 my daughter and her husband agreed to separate and their divorced was final in 2009. In the divorce decree they mutually agreed to an equal disposition of personal assets and assumption of full responsibility for debts that were in their respective names; meaning each took responsibility for credit card debt in their name. Managing the Estate My daughter’s ex-husband did not have a will. The funeral arrangements and the dissolution of personal items is being handled by the deceased’s brother and the brother is also going to notify all creditors of the death. Community Property We are aware that Arizona is a community property state; we understand what that means, and consequently we are very concerned about how the community property designation complicates matters. In addition, we also understand that the level of joint liability for new debt ceases with the divorce. The big question is, “How can my daughter be protected from her ex-husband’s potential creditors?” Next Steps? It is unclear what protections my daughter might enjoy and how to respond in the event she is chased down by her ex-husband’s creditors. We are looking for guidance and possibly legal assistance to protect my daughter’s resources. Can you please give me a preliminary prognosis and answer the primary questions, "What liability does my daughter have for debts of her ex-spouse, who is now deceased and how can she protect her assets from her ex-husband’s creditors?"
    3 Votes