i will try to make this as short as possible. i think i already know the answer but not 100% sure. im asking for input from you all if you have any experience in this before i spend more money on lawyer fees.

got divorced 3 yrs ago ex and I split everything 50/50. we had purchased some lake property while married and took a home equity loan out to pay the 20% down on a 250k loan since there was no house/cabin on the property. Then had a 5yr ballon loan on the remaing 80% of total purchase price.

so when the dust settled from the divorce i ended up with the house and the home equity loan and she recieved the lake property. fast fwd to today now the 5yr ballon payment is due. even though the decree and other paper work has been done up saying that she is responsible for the ballon loan. my name is sitll on the original loan which she now has to either pay in full or refinance the original loan.

problem is she is flip flopped on the lake property now and if she refinaces she will end up paying a higher interest rate. bank agreed to keep the current setup for another 3 yrs if i agree to it. i know i dont have to agree and can say tough fn luck, but if its no skin off my back i dont care. I try to be civil/nice to her since its best for the kids and life moves along alot smoother if im not an ass.

so my question concern is this - i have some bad health issues and im just buying time at this point. i have trust funds set up for my kids and they will recieve all my assets plus they will have a huge amount of money waiting for them when they are older. so if i play the nice guy and decide to go ahead and keep my name on the loan for her. if she decides after i pass to default on the loan would the bank then be able to get the money in the trusts set up for the kids to pay the property off? im guessing they would have access to it but dont know for sure. if the bank cant touch the trust funds i will help her out if they can touch it she is on her own then.

thanks in advace for any input

gl at the tables!!!

Get an attorney to confirm, but I think that your assets are safe if she defaults on the loan. Regardless, you should definitely have an attorney review the bank note and deed of trust.

The bank's risk is secured by the value of the property. They have no right to go after any additional borrower assets in case of default. Therefore, is she defaults the bank will just take the lake property and be done with it.

Just be sure when you sign the new loan documents, don't pledge any additional assets as collateral (other properties, investment accounts, life insurance etc.).

Sorry to hear about your health problems. Best of luck to you and kudos to you for thinking of the kids first and keeping it civil.

what does life ins have to do with it?

 

Originally Posted by ShortyJacksn

The bank's risk is secured by the value of the property. They have no right to go after any additional borrower assets in case of default. Therefore, is she defaults the bank will just take the lake property and be done with it.

Actually, most states allow for the bank to pursue a deficiency judgment if the value of the property doesn't satisfy the debt.

and both borrowers would be named on the judgment....

-Matt

 

Originally Posted by bobhica_10

Matt,

so what you are saying is even though legally i have no connection to the loan or lake property other than the fact my name is on the current loan. the bank could come after the trust fund that i have set up for the kids since my name is on the loan? and the trust fund would consist of life ins, IRA, and other funds.

I would say if you have assets in a trust, those assets should be safe. I'm assuming the assets have been properly transferred in to the trust.

With that being said, it's a horrible idea to be on a loan with your ex on a property you have no interest in. It has so many ways to go bad.

You say you have no connection to the loan or the lake property, but that doesn't seem to be the case. Why else would the bank agree to modify the terms of the loan if you agree to it? Your ex should have refinanced after the divorce settlement was finalized and you should have granted your interest in the property to her. It sounds like you are still 50% owner on the property and 50% owner on the*debt.

Also, if your name is on the loan and you pass away, your estate would then assume the debt.* If you were joint tenants on the property, she would get 100% of the property and your heirs would have to deal with the debt. not good...

I could be missing something.... you really should speak with an attorney in your state.

One more thing... banks normally don't pursue a deficiency judgment even if they have the right. They typically write off the loss and you would then have to claim a "phantom income" on your tax return. Example, you owe 300k. Bank gets 250k in foreclosure. Bank writes off 50k. You have to claim 25k (your half) as income.

-Matt

Matt is 100% correct here. Just like he said banks do not normally go for the deficiency judgment but times are changing. I have seen 2 this year in FL. The laws in MN are alot different than FL & TX.