Marital Home Sales: When the Mortgages and Debts Exceed the Selling Price

Posted by Daniel Clement on April 24, 2008
As part of a divorce, the marital home is generally sold. But, in view of the slow down in the home sales market, it is possible that the proceeds from the sale of a home may be insufficient to fully pay off the mortgages on the property.

In a prior post, I explored the option of retaining possession of the martial home to avoid selling at a loss. For some, this is simply not an option and the home must be sold. Most couples cannot or simply do not want to continue living together after a divorce. Many cannot afford to maintain the marital home on their own.

The New Jersey Law Blog offers great insight in dealing with the situation  when the sales price martial home is insufficient to satisfy the mortgage.

If the homeowner is unable to obtain a sales price which enables him to pay off all loans and closing costs, and he does not have the funds to make up the difference, then he may want to try to obtain approval from his current lender(s) to accept an amount less than the full amount due on its mortgage. For a lender, this may be acceptable to obtain repayment of a substantial amount of its loan and to avoid the costs and delay of foreclosing on the loan. This will generally mean that the Seller will not receive any funds from the sale of his home.

In order to obtain such approval from a lender - which may or may not be granted - the homeowner needs to contact his lender(s) to determine what information they will need to make their decision. This usually includes a financial statement of the homeowner, copy of a contract of sale, appraisal, and other pertinent documents. Generally, a lender will not consider approving a short sale without a clear economic hardship on the part of the homeowner and an existing default or pending foreclosure.

Until recently, forgiveness of a debt under these circumstances, could trigger a taxable event according to the IRS. This means that if a lender forgave a part of the mortgage debt by accepting a reduced amount in full satisfaction of the loan, then the amount forgiven could be deemed taxable income to the homeowner. This was so even though the homeowner received nothing from the sale. However, in December 2007 Congress passed the Mortgage Forgiveness Debt Relief Act of 2007. This Act amends the Internal Revenue Code to exclude from gross income amounts attributed to a discharge of indebtedness incurred to acquire a homeowner’s principle residence. The amount of the debt forgiveness can be up to $2.0 million. Thus, a homeowner is now able to sell his home for less than what is owed on it without incurring an additional tax liability. This exemption for forgiven debt, however, is only temporary and expires within three years.

When a Party to Divorce Blogs . . . .

Posted by Daniel Clement on April 18, 2008
Following up on yesterday’s post about disgruntled spouses airing their dirty laundry on the internet, the front page of the New York Times featured the article When the Ex Blogs, the Dirtiest Laundry Is Aired.

According to the article, it is now fairly common to write a blog about your divorce.

It is impossible to say just how many people are blogging about divorce, but the percentage of Internet users with personal blogs has quadrupled in five years, according to Pew. Mary Madden, a senior researcher with the Pew Project who specializes in online relationships, said that in emotionally charged times, some people go to the Web.

Since one person’s truth may be shaded by hurt, anger, betrayal or just a desire to seek revenge, it is no shock that some aggrieved spouses have gone to court to stop the publication of the blogs.
Absent a confidentiality clause or other provision limiting the right to discuss the divorce or marriage, the blogger may enjoy a first amendment freedom of speech.

But, as one court recently pointed out, While Laurie’s statements may be covered by the First Amendment, they were “ill-advised and do not promote co-parenting.”

I suspect there would be little dispute, particularly when there are children, that parties should not post information about their spouses’ personal failings and short-comings on the internet where the writings can easily be found.   While writing all the your thoughts and feeling may be therapeutic, maybe all the thoughts should be contained in, to quote the Moody Blues, “letters are written, never meaning to send.”

Details of Divorce in You Tube Video

Posted by Daniel Clement on April 17, 2008

Discretion, being the better part of valor, it is seldom a good idea for a party to a divorce, to publicize the gory details of their case. But one ill-advised wife went even further;   she made  a You Tube video so she could air her dirty laundry.



In her video, Tricia Walsh Smith discuss her sex life (or absence of) with her husband, her husband’s stash of porn, condoms and Viagra, her relationship with her step-children and the terms of her pre-nuptial agreement.

As pointed out in the Legal Blog Watch:

A number of divorce lawyers interviewed for an Associated Press story criticized Walsh-Smith's tactics.  Attorney Bonnie Rabin commented that You Tube videos "bring the concept of humiliation to a whole new level."   Moreover, videos can ultimately hurt litigants -- a judge might question a party's judgment in posting a video and hold it against him in ruling on the case.  And there's always the possibility of a defamation action if the video rants include intentionally false information.

Walsh-Smith is now represented by famed divorce attorney Raoul Felder -- though she wasn't his client when she made the video.  Felder told AP that he thought his client "comes off well."  However, the majority of commenters on the video disagree; many labeled Walsh-Smith a "gold digger," with one even comparing her to another Brit involved in a contentious divorce: Heather Mills.

This video is simply an awful idea. It should not be emulated.   Despite Ms. Walsh’s attempt to portray herself has a naïve spouse, rejected by her husband, she comes across as shrew, mean and vindictive. 

The video is intended only to embarrass and humiliate her husband. It can also be viewed as a not so veiled threat as to what may follow if her husband does not capitulate to her demands.   Either way this type of conduct is reprehensible.

If this type of public broadcast of martial differences ever caught on, I would expect it to be negatively considered in decisions awarding equitable distribution, maintenance and, most certainly, child custody.

Husband Required to Pay Child Support for Artificially Inseminated Child

Posted by Daniel Clement on April 14, 2008
On appeal, a court ruled that a husband can be deemed the legal parent of a child born to his wife, where the child was conceived as a result of artificial insemination during the marriage, but where the husband's consent to the artificial insemination was not obtained in writing.

Domestic Relations Law § 73  provides that:

Any child born to a married woman by means of artificial insemination performed by persons duly authorized to practice medicine and with the consent in writing of the woman and her husband, shall be deemed the legitimate, natural child of the husband and his wife for all purposes. . . . The aforesaid written consent shall be executed and acknowledged by both the husband and wife and the physician who performs the technique shall certify that he [or she] had rendered the service.

The problem in Laura Ww. v Peter Ww was that the husband never signed the consent. In fact, shortly after the wife was artificially inseminated, the parties separated. At the time they separated, parties agreed, in writing, that the husband would not be responsible for paying child support the artificially inseminated child.

The Court declared the separation agreement unenforceable.

Indeed, the agreement left the child fatherless without any hearing or analysis of the child's rights and interests. Given that "the needs of a child must take precedence over the terms of the agreement when it appears that the best interests of the child are not being met," we agree that the parties' agreement which preceded any determination of legal paternity to leave the child without the husband's support cannot stand


The Court relied on New York’s strong presumption that a child born to a marriage is the legitimate child of both parents. In addition the court announced that it would “follow the lead of other jurisdictions that impose a rebuttable presumption of consent by the husband of a woman who conceives by[artificial insemination, shifting the burden to the husband to rebut the presumption by clear and convincing evidence."

In addition, the court stated that the doctrine of equitable estoppel also precluded the husband from "seeking to disclaim paternity of the parties' child, whose best interest is paramount."

The Recession, The Housing Crisis and Divorce

Posted by Daniel Clement on April 09, 2008
They started to the fight
When the money got tight . . .
                Billy Joel, Scenes from an Italian Restaurant

With all the talk about recession and the fall-out from the sub-prime mortgage crisis, it is no surprise the telephones in most divorce lawyers’ offices are ringing off the hook. I have even noticed that the numbers of readers of this blog has dramatically increased in the last several months.

Jeffrey Lalloway in the California Divorce and Family Law blog notes:

The sharp downturn in the market is taking a similarly painful toll on couples who are breaking up. But now it's not that they can't afford their next home, but that they can't get rid of the old one. . .

"The housing market is having a major impact on divorce cases," said Stephen Ruben, a certified family law specialist in San Francisco. "If a house doesn't sell, it has a major impact on cash flow for child support, on where people live, on future taxes.

In the midst of the housing boom, when a couple divorced, the marital home was sold and the parties could simply cash out. The dispute was oft motivated by greed; each of the parties would argue to maximize his/her interest in the marital home and the size of his/her profit.

In the present economic environment, the marital home may still be sold, but if there is insufficient equity, the parties may be fighting how the loss will be split. As a result, instead of taking a profit at closing, the parties may argue about who will pay to cover the mortgage short-fall.

Mr. Lalloway notes that some couples, rather than taking the loss on the sale of the home, are forced to continue to live together until they can afford to sell the property. In other cases, one party gets the right to remain in the home.

Both scenarios trigger other considerations.   Parties forced to continue to live together, simply are denied the ability to get on with their post divorce lives. How possibly could you move on if your spouse is sleeping in the adjoining room?


Even if only spouse remains in the home, post divorce- the parties have to address:
  • What will trigger the sale of the home?
  • Who pays the mortgage?
  • Does paying the mortgage increase the payer's equity?
  • Who gets the mortgage interest deduction?
  • Who is responsible for the maintenance and repair of the marital home?

To paraphrase another song, breaking up just got harder to do.

New York Courts Continue Trend: Same Sex Marriage Recognized

Posted by Daniel Clement on April 02, 2008
A second appellate court went out of its way to implicitly recognize the legitimacy of same sex marriage in New York.

I previously discussed the case of Funderburke v. State of New York in which the claim of an employee of the Uniondale school district who sought health benefits for his same-sex partner was dismissed. The basis of the dismissal was that New York, at the time, did not recognize same sex marriage. The parties were validly married in Canada.

Since that time, as I have posted, New York courts began to recognize the validity of same sex marriages. In addition, the state has changed its position “regarding recognition of foreign same-sex marriages. The DCS now requires public employers within its jurisdiction to provide full spousal benefits to same-sex couples validly married in another jurisdiction, and requires all members of its health insurance program, including the District, to provide such benefits.”

Since there was no longer a dispute as to the validity of the marriage or the same sex partner’s right to health benefits, the appeal was moot. Nevertheless, the Appellate Division vacated the lower court’s order so as it prevent it “from spawning any legal consequences or precedent."

In doing so, the Appellate Court, went out of its way to remove any obstacles to the continued recognition of same sex marriages in New York. Thus far, two of the four Appellate Divisions have recognized same sex marriage

Hidden Assets in Divorce: A Revealing Look

Posted by Daniel Clement on April 01, 2008
A recent study discovered that 20% of divorcing couples tried to conceal assets or income from the spouse.

As reported in the Telegraph:

The study - by the accounting firm Grant Thornton, which surveyed 100 family lawyers - found that husbands were much more dishonest when a marriage crumbled.

In cases where assets had been hidden, 88 per cent involved men concealing wealth from their wives. Just two per cent involved women hiding assets. In the remainder of cases, both partners tried to conceal wealth from one another. . . .

"Men are seeing these huge settlements and they are terrified," she said. "If they think a marriage might break down, more and more men are panicking and trying to put their capital into trusts and offshore accounts or buy assets in a third party's name so that they are hidden from their wives.”
As a result of this trend, finding hidden assets as part is a divorce has become an important aspect of many divorce cases. 

And now for the shameless plug - I will be chairing a program aptly titled, Finding Hidden Assets- What Every Divorce Bankruptcy & Commercial Litigator Needs to Know at New York City Bar on April 24, 2008.

The distinguished facility of this program includes:
 It looks to be an eye-opening discussion about uncovering hidden assets.