Going Through a Florida Divorce with a House Under Water

Written by: Lenorae Atter, Attorney at Law

A Florida divorce in today’s economy can be tricky given the financial circumstances in which many people find themselves. Though there is economic recovery, the fact remains that many people are still underwater when it comes to their homes or properties and Jacksonville, Florida is no different. In a Florida divorce, the assets and the debts accumulated during the marriage are equitably divided in accordance with Florida Statute 61.075. An equitable distribution of property and debt can often be unequal if there is a disparity in the incomes or there is more than one significant debt held by the parties, then dividing the responsibility for each can be challenging.

In Florida, most often the home is often ordered to be sold unless the parties have a minor child. Given the marketplace and the realities facing many people who are upside down on their home, equitably dividing house debt can be a challenge. The concern for many is that even if the house were to be placed on the market, there is no way to recover the actual amount owed, so a short sale would have to be approved. Therefore, the parties are on the hook for whatever portion is remaining as a set-off. Also, the concern is that if one party is to take the home, then there is a strong likelihood that at some point, that party will be living rent free in the home until kicked out by foreclosure, thus strapping the other party with an unnecessary debt.

Recently, a Florida couple was divorcing and the wife wanted to keep the marital home because she did not want it to be foreclosed upon or sold as a short sale given her credit. The trial judge awarded her the home, but did not divide the debt owed on the home since there was a strong likelihood, in today’s economy, that she would end up living there rent free until kicked out by a foreclosure process. The trial court even noted the reality that many people are just turning in their keys and walking away from the home, thus not thinking it pertinent to divide the debt between the parties equitably.

The 3rd District Court of Appeals in Florida felt differently and found that the legal basis provided by the trial court for not dividing the debt was insufficient. The appellate court ruled that the legal rational by the trial court was not enough to actually defeat the Florida law requirement for equitable distribution. In its opinion, the court found that even if the parties were to walk away from the property, they could be strapped with a deficiency judgment, which would allow the bank to collect against one or both of them. Therefore, the court ordered that the foreseeable debt regarding the home did need to be equitably distributed to the parties.

In a divorce the marital home is often sold and the parties equally take responsibility for any debt owed or they equally take the net profit. The party that takes care of the payments while the house is on the market, or kept, is often given a credit for the payments made since the divorce. With the realities of foreclosure in Florida, the fact remains that there may be no debt to inevitably divide, but the court should at least provide a provision for how the debt will be paid if there ever is a deficiency.