Cosigned Home Loans

• In most cases when two spouses apply for a mortgage, both partners provide information on their income, assets and credit. The lender approves the mortgage loan based on the combined information provided. If either party stops paying, the other spouse is still responsible, regardless of his ability to pay. This can destroy your credit if you are unable to cover the payments.
  
  

Bankruptcy

• If one spouse files for Chapter 7 bankruptcy protection, she is still responsible for making mortgage payments until her bankruptcy discharges. At that point, she is no longer obligated to pay. If you are behind in your payments and your spouse files for Chapter 13 protection, she remains equally responsible for back and current payments. When the court approves her plan, if it specifies a payback of delinquent payments over several years, the court ruling will prevent further attempts to collect the delinquency. This is true as long as you comply with the submitted and approved payment plan. Your lender must accept the payment plan and cannot attempt to collect the back payments from you.
  
  

Options

• If your spouse filed for bankruptcy because you are separated or divorced and your spouse no longer wants to be obligated for the mortgage, you should consider refinancing to remove her from the title. If you do not do this, she will still have an ownership interest in your home, but she will no longer be responsible for the mortgage. It will be necessary for her to sign a deed releasing her interest in the property. This could be a problem in later years if you want to sell or refinance your home and she is not available or is not willing to cooperate. If you do not have enough equity to refinance, ask your lender if it will approve you for a loan modification. The loan modification refinance will remove your spouse from the title, since you will be qualifying on your own.
  
  

Considerations

• In most cases, it is advisable to sell your jointly owned property. If you owe more than the home is worth, you should discuss a short sale with your lender. This will give you some time and you will not have to make payments you cannot afford without income from your spouse. If you do have equity, selling the property will allow you to split your assets according to your divorce decree or separation agreement.