While filing for bankruptcy offers some great benefits for many people, it isn’t a cut and dry process. There are numerous gray areas and some people find that their cases are handled much differently than others. The reason is that each bankruptcy case is highly unique to the debtor’s individual financial situation. Factors such as divorce can complicate the process and make certain aspects of the process more challenging to resolve. One such issue is what happens to the house if an ex-spouse files for bankruptcy.
In general, filing for bankruptcy after a divorce can make the process a bit smoother because debts and assets have already been divided in the divorce decree. If one spouse is given the house through the divorce proceedings and files for bankruptcy later, the question still remains who is ultimately responsible for the mortgage debts?
Most likely, both of the ex-spouses will remain on the deed to the house in a divorce proceeding, unless the court motions to remove the ex at the time of the divorce hearing. When both parties are left on the deed, the mortgage lender does maintain the right to seek payment from either party. In this case the lender may still attempt to collect on the mortgage debt from the non-filing spouse. Neither a divorce or separate bankruptcy filing is the business of your creditor and they usually do not give authority to these proceedings when absolving both parties from a jointly held debt.