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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 01-13-2010, 11:11 PM
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Default Negative Net Worth

Hi guys,

Long story but after calculating the marital home and investments, our net worth together is negative.

We are both in our 20's with no children and she's finishing school while I work. My job is decent but not decent enough to keep up with her enormous spending habits.

Anyway, what would be the process for dividing the home since it's actually worth less than the mortgage right now?

Would we essentially take on a certain amount of debt each proportionate to our income and that's it or am I stuck holding the whole bag considering I'm essentially the only one currently working?

We've been married about a year and a half and I'm worried as to how much this is going to cost me. Ideally, I'd rather just assume all the debt, give her nothing and send her on her way.
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Old 01-14-2010, 12:17 AM
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You will not be able to close your mortgage if you sell unless you pay off the entire mortgage. You could assume the debt (if it is not substantial)and keep the house and that could be offset by the SS you probably would owe her.

It is important to know how much you would owe if you sold the house and how much loss you would assume if you took over her share of the mortgage. Have you spoken to your mortgage broker?
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Old 01-14-2010, 08:00 AM
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If you have a negative net worth, you could technically get her to pay you equalization payments to cover her part of the debt or even maybe spousal support.

However, if the amount is insignificant, or if you would owe her spousal support because you're higher earning, it might be worth it for you to take the debt and just let her walk away.
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Old 01-14-2010, 11:27 AM
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My place is assessed at $455,000 and the mortgage is about $490,000.

I purchased the home a year ago and prices have tanked since then. My wife has about $8000 in student loans which I signed off on and we collectively have personal debt of about $20,000.

Minimal RSP's since we're in our 20's. I also have an investment loan for $300,000 and the funds are currently worth about $280,000.

So overall, on paper, we're in the hole about $83,000.

Honestly, I'd rather her just take her clothes and leave. I don't care if I'm getting the short end of the stick, I just want her out. The problem is, I have no clue where she is going to go since she's still in school and working party time (she's one of those students for life since it's taken her 7 years and still hasn't finished her undergrad).

With a short marriage, it looks like it should be a no brainier when it comes to figuring out a buyout or SS but I have no idea.

My job pays about $120k a year with hers paying $10k
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Old 01-14-2010, 11:43 AM
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The problem is, I have no clue where she is going to go since she's still in school and working party time (she's one of those students for life since it's taken her 7 years and still hasn't finished her undergrad).
That's a good one. Very funny
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Old 01-14-2010, 11:49 AM
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We've been married about a year and a half and I'm worried as to how much this is going to cost me. Ideally, I'd rather just assume all the debt, give her nothing and send her on her way.
If you're willing to let her walk on the net debt, keeping the house for yourself, then offer that in exchange for no spousal support.

For a young spouse in a one and a half year marriage, the duration will be very low, maybe a year, but the quantum could be over $1,000/mth given your income discrepancies.
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Old 01-14-2010, 11:58 AM
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I'm not sure where you'd be getting the short end. You have the career and you're keeping the home. The fact that the house has devalued has nothing to do with your breakup and apparently your wife hasn't been carrying the mortgage, you have, so the investment (in a non-legal sense) was yours and the loss stays yours. She didn't buy in, other than through a marriage certificate.

In a strictly legal sense, you and she should share the loss, but she would have an argument of undue hardship if you tried to get her to walk away with half of the family debt. That amount of debt was assumed through the full family income (primarily yours) and splitting it 50/50 and laying over 40k debt on someone with a 10 income would be ridiculous. The law would probably go with her side of this argument and you would get the bulk of the debt anyway, and IMHO that would be more than fair.

While on paper you have taken a loss, in practice you don't lose money until you sell. This is the tricky part of v-date and there has been some talk of treating the v-date value as flexible during a large drop in the economy. I believe I remember one news story of a case where the assets of a couple were adjusted in wife's favour, the husband's business had devalued last year but was expected to recover.

In any case, within 5 years you will have recovered your investment. Trying to transfer a paper debt onto her side of the balance sheet is barely legal but hardly fair. A judge would take that into account.

So where do you go from here? She can find student housing just like every other student at the school. We have all be in situations where we had to find something quickly. The student services will have a listing of affordable rentals.

You are better off making her a reasonable offer, rather than fighting it out. Since she didn't put much or any equity into the house, ask her to just sign off on that. Ethicly she should keep her student debt, as it's an investment in a long term career and future income. You should keep your investment debt, the investment will recover. Make this a strong part of your negotiation.

That leaves the $20k personal debt. You don't say how long you were married, there would likely be at least some spousal claim. Offer her to take her share of that $20k and offer to pay a lump sum spousal so she can get on her feet and find housing.

You have a good job, you are able to carry the mortgage, and basicly you are left with the amount of debt you have anyway. So offer her $10k to be done with it. You do want to explain in a reasonable way what I wrote above, you want to present this as reasonable alternative to court costs.
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Old 01-14-2010, 12:26 PM
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I was married a year and a half so the duration is short.

We were given a car by her parents (it was used at the time) and it's in my name in both insurance and title. I was planning on just giving her back the car, keeping the furniture (which I purchased before the marriage anyway) and she can take what belongs to her which is basically her hair care products, clothes and a few other small items. I would want her to take her $8000 in student loans but I'd rather pay it out myself and be done with it.

I hate the idea of things dragging on. I'd rather just cut my ties and move on. You are 100% right about recovery. I know the home and the investments will be worth a significant amount of money in the future and to be honest, it's debt that I can pay down without much trouble although my job stability is very limited.

If I give a lump sum payout and then lose my job, I could be in trouble until I find another position so perhaps that's something to consider.

Either way, my main concern is someone said I might be on the hook to pay for my ex's education until it is completed along with supporting her.
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Old 01-14-2010, 01:06 PM
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OK, for a year and a half marriage, you would pay very little spousal if any. Your argument should be that she was putting herself through school (or intending to) before you married and she is capable of continuing.

If she started school after marriage and you made some kind of implied committment to put her through school, then she may have an argument. That doesn't mean she wins, but she can make an argument. She could say that would never have considered taking on that much debt except that the family income was sufficient, etc. Your counter, as I said, would be that the debt is a career investment that will pay returns, just like your $300k investment debt.

You are still better off not going to court over it, but that's also up to her. Try to involve a mediator before you get lawyers into it.

You are better off paying a lump sum now, if you don't have job stability, than being on the hook for a large monthly payout.

So personally, my offer would be, admit the car is hers, no contest. State that the house debt and investment debt is yours, no contest. State that her student should be hers, no contest. Tell her the grey area is the $20k (credit cards? Line of credit?) and offer to take her share of that debt in exchange for a quick settlement.

She may ask about spousal, I wouldn't bring it up at first. If she does, point to the short length of the marriage, offer her a modest lump sum to get her into an apartment, etc.

You have no obligation to keep on supporting her for any length of time after only a year and half. The courts would only make an exception if she moved or quit a decent job to marry you.
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Old 01-14-2010, 03:29 PM
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So offer her $10k to be done with it.
Funk dat. Offer to let her walk away from the marital debt in exchange for no SS.

When parties equalize family property, increases in house value accrue to each spouse, and the one who walks away gets to participate in that increase, even if the one who keeps the house doesn't sell it right away. So why is it OK for the spouse who walks away to be freed of participation in a loss????

Last edited by dadtotheend; 01-14-2010 at 03:53 PM.
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