Is a spouse responsible for negative equity in a home that is both marital and non-marital property?

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Is a spouse responsible for negative equity in a home that is both marital and non-marital property?

I am going through a divorce. I owned my home prior to the marriage but mortgage payments were paid with marital funds, so it appears the home would be both marital and non-marital property. The home has lost significant value during the course of the marriage. Is my soon to be ex responsible for their portion of the negative equity in the home?

Asked on July 20, 2012 under Family Law, Maryland

Answers:

Brad Micklin / The Micklin Law Group

Answered 8 years ago | Contributor

Your question is difficult to answer because it depends on many factors of equitable distribution.  Equitable distribution is the principle that divides assets and debts. This does not mean equal distribution but, instead, is determined by the court after considering a number of factors. Some of these factors include, but are not limited to, the length of the marriage, the contributions of both parties to the acquisition of assets and debts, the ability of the parents to earn once divorced, childcare responsibilities of either parent come, any other assets available to contribute to support, and any other factor that the court considers relevant.

The courts also look at whether it is a passive or active asset.  Passive assets change value simply becuase the market dictates, such as retirement accounts, and active assets change in value becuase of efforts and contributions. Increases and decreases in value of passive assets are not marital because they result from market conditions and not marital efforts or contributions and active assets are marital because changes result from effort.  

Marital residences are generally considered active because family contribute efforts (repairs) and funds (mortgage payments).  However, in your case, the diminution in value resulted from market conditions creating a very unique result.  I think the answer to your question will turn on the very specific facts of your case: how long you owned it before and after your marriage, how much of marital funds went into the house and how much debt results from the sale.

You should speak with an experienced attorney who is familiar with these areas of law.

Good luck.

Brad M. Micklin, Esq.

187 Washington Ave., Suite 2F

Nutley, NJ 07110

973-562-0100

[email protected] 

This information is based on New Jersey law and upon the limited facts you presented. My advice may be different if I find that the facts presented are different.  Additionally, this answer does not contain any confidential information nor does it create any attorney/client relationship. 


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