The Marital Home in a Tennessee Divorce

From The Mid-South Divorce Guide, chapter 14, by William W. Jones
IV, a Memphis family law attorney and Rule 31 Listed Family Mediator
licensed in Tennessee and Mississippi. This guide covers Shelby, Tipton
and Fayette Counties in Tennessee and DeSoto, Tate and Tunica Counties
in Mississippi.

Questions this page answers

• Who gets the house in a divorce in Tennessee?
• Does a quitclaim deed remove me from the mortgage?
• Can I keep the house in a divorce?
• What happens to the mortgage after a divorce?

The marital residence is usually the biggest asset, the biggest debt,
and the biggest emotional attachment in the case. That combination
causes more bad decisions than anything else on the balance sheet.

First, the two documents

Before we go any further, there is something about owning a house
that most people have never had a reason to learn, and not knowing it
costs people real money in divorces every year. There is no shame in not
knowing it. You signed a stack of paper at a closing table years ago,
somebody slid pages across at you, and you signed where the tabs
were.

There are two separate documents, and they do two completely
different things.

The deed says who owns the house. It is recorded
with the county register. If your name is on the deed, you own an
interest in that property. Take your name off the deed and you no longer
own it.

The mortgage, or more precisely the promissory note it
secures, says who owes the money. That is a contract between
you and a lender. If your name is on that note, you are personally
liable for the debt.

Those two documents have nothing to do with each other. You can own a
house you do not owe on. You can owe on a house you do not own. And that
second one is where people get hurt, because signing a deed does not
touch the note.

Here is the mistake, and I see it constantly. The wife keeps the
house. The decree says she gets the house and assumes the mortgage. The
husband signs a quitclaim deed handing over his ownership. He walks out
feeling finished.

He is still on the note.

He now has a mortgage on his credit report for a house he does not
own, which will hurt his ability to buy his own place. If she stops
paying, the lender calls him, and the lender does not care what a
divorce decree says because the lender was never a party to your
divorce. A judge can order your spouse to pay a debt. A judge cannot
order a bank to release you from a contract you signed.

The only thing that gets your name off the note is the lender
agreeing to release you, which in practice means a refinance or a
sale.

The three options

Sell it and split the proceeds. Cleanest option.
Nobody stays on anybody’s mortgage. Everybody gets liquidity.
Emotionally the hardest, especially with kids.

One of you keeps it and buys the other out. The
keeping spouse pays the leaving spouse their share of the equity,
usually with other assets or with cash from a refinance.

One of you stays for a defined period, then it
sells. Common with children. The kids finish high school, then
the house goes on the market. This requires careful drafting about who
pays the mortgage, who pays for repairs, who gets the tax deductions,
and what happens if the person living there stops paying.

The refinance problem

So the fix is to require a refinance within a set period, with a
consequence if it does not happen, usually that the house goes on the
market. Do not sign the quitclaim deed until the refinance closes. And
before you agree to keep the house, get pre-qualified. Find out whether
you can actually refinance on your income alone. A lot of people agree
to keep a house they cannot afford and cannot refinance, and they are
back in court eighteen months later.

Can you afford it?

Run the real number. Mortgage, taxes, insurance, HOA, utilities, and
a realistic maintenance figure. Roofs cost what roofs cost whether or
not you are divorced.

Then compare it to your actual post-divorce income, including support
if you are receiving it, and remembering that support may end. Keeping a
house you cannot carry is how people end up house poor and miserable in
a home they fought to keep.

I have watched clients trade away retirement accounts to keep a
house, then sell the house three years later anyway. The retirement
account would have been worth more. Emotion drives that decision.
Understand that going in, and if you still want the house, at least you
chose it with your eyes open.

Download the whole guide. All 35 chapters plus four blank client forms, complimentary, no email required. Download The Mid-South Divorce Guide (PDF)

Questions about your own situation? The Jones Law Firm, 5100 Poplar Ave, Suite 708, Memphis, TN 38137. Call (901) 761-5353.