One of the most common questions we get asked when people divorce is whether they can keep their house when they get divorced. The good news is that the answer to this question can be yes. The bad news is that it is not always possible.
The two biggest reasons someone cannot keep their house in a divorce are (1) they cannot afford the house after the divorce or (2) the only way the spouse not keeping the house can receive his/her portion of the equity is for the house to be sold.
Can you afford to keep the house after the divorce?
There are really two issues at play here. Can you afford the monthly payment on the house? And can you refinance the mortgage on the house into your own name? If the house is already in your name solely this won’t be a problem, but if you jointly purchased the house and both spouses are on the mortgage paperwork, then a refinance will typically be required. The good news about a refinance is that, if you have enough equity in your house, you can use the refinance to pay the other spouse his or her equity (we’ll talk about this more below). Of course, if the house is already in your name solely, you will not need to refinance it (although that doesn’t mean you are off the hook on the equity).
How does your spouse receive his/her portion of the equity?
Indiana is a marital pot state when it comes to division of assets and liabilities in a divorce. What that means on a practical level is that absent a prenuptial agreement, the Court has to consider ALL of the assets and liabilities of both parties at the time of the divorce regardless of how they are titled. The Court then has to divide those assets, starting with a presumption that the assets are divided equally. What does that mean for your house? Well it depends on what other assets you have. If your house is your only asset with value and you have no debts (including retirement assets like 401ks or pensions), then it is possible your spouse will be entitled to receive a portion of the equity in the house.
How you pay the portion to your spouse depends on either the agreement you reach or the Court’s order if you can’t reach an agreement. Many people agree that the spouse will receive his or her portion upon a refinance of the mortgage. In a typical refinance, the party refinancing can take out a mortgage up to a certain percentage of the value of the house. If the amount that can be refinanced is greater than the mortgage balance, then the mortgage company will give you cash at closing which you can use to pay the other spouse. If the amount of cash received in the refinance is not enough and/or the parties agree otherwise, the other option for paying the equity is a simple payment plan. Pursuant to Indiana Code 31-17-5-4, the Court is authorized to order the house sold (or any property sold) and/or to order installment payments made.
To be clear, there is no quick and easy answer to whether you can keep your house in a divorce. There are a number of factors in play but these are a few of them. If you’d like to discuss your particular facts and see what our attorneys have to say, please call us at 317-953-2182 to set up a thirty minute phone consultation with an experienced Indiana divorce lawyer.