When a couple has gone through a divorce in Georgia, two of the key issues addressed are marital property (including real estate) and marital debt (including mortgages).
Domestic law helps guide Judges on determining which assets and debts are marital or separate, or the proper equitable division of those assets. The Couple often believes that once the Judge issues a final decree, that those matters are resolved. Once that decree is made, though, we cross over into the Real Estate law side of things, in order to put the Judge’s decree into effect.
When it’s time to sell a house in Georgia, the closing attorney will search the title to a property in the deed records where the property is located. Your divorce decree is not there, and the closing attorney would likely have no way of knowing about it. The decree exists only in the civil clerk’s files (and in your possession). So, assuming a married couple bought a property together, and nothing was done after the divorce decree issued, then no one knows what the Judge ordered.
Accordingly, if the Judge awarded the house to one party, we have to record a Deed transferring the property to that party. Normally this is accomplished through a quit claim deed. Once this deed is recorded, then someone searching title to the property would know that only one person owns it. Without this deed, any sale or transfer of the property would require both parties to sign off, which can often involve awkward interactions and revisiting issues that had long since been thought resolved.
Your mortgage company was not a party to the divorce. If both spouses signed on the promissory note and/or the associated Security Deed, then form the lender’s perspective, both spouses remain obligated. If one party was designated as “the responsible party” for the debt payments, that’s fine, but the bank is not bound by that decree. So, if the responsible party defaults on the note, both spouses may be sued, any foreclosure or debt default may show on both spouses’ credit report, and the non-responsible party might have to sue the responsible party for indemnification.
If, though, the property is sold (resulting in a payoff of the mortgage), or if the responsible party refinances (which also results in a payoff of the original mortgage), then everything is clear. Again, though, for a sale or refinance, either both parties would need to sign off, or a quit-claim deed would have to be in place transferring the property to the responsible party.
Often mortgages contain a “due on sale” clause requiring that the balance be paid in full if the property is sold or transferred. While this provision isn’t often enforced on a transfer from one spouse to the other pursuant to a divorce decree, that remains in the discretion of the lender.
If you’ve resolved a divorce, and real estate and/or mortgage debt was addressed as part of the final decree, make sure that those directives are completed. Those directives are not automatic or self-fulfilling; there is still work that has to be done. Often the closing attorney is able to address the issues with various band-aids and fixes at the time of a sale, but the preferred process is to execute the directives of the Decree as soon as possible. As always, feel free to contact us if you have any Georgia real estate questions.