In many marriages, the major asset is the marital residence; but what happens when the mortgage(s) exceed the market value of that residence?   Our Florida Supreme Court Certified Mediators at Mediation of Coral Springs, Inc. have conducted a number of mediations which have involved this scenario and are familiar with the difficulties that the parties are faced with in trying to fashion a fair and equitable mediated settlement agreement in this situation.

Florida Statute § 61.075 states that Florida is an equitable distribution state.   As an equitable distribution state, the court is guided by principles of equity which means that both the husband and wife should be treated in a fair manner when dividing assets and liabilities.  But it can be difficult to treat the parties in a similar and fair manner when their former marital residence is upside down.

At Mediation of Coral Springs, Inc. we have found that most of the time, both spouses names are on the deed and the mortgage, so there are credit issues for both of them regardless of how they allocate their upside down former marital residence.

The spouses have several choices when it comes to how the spouses allocate the former marital residence, including: sell the home and eat the loss, let the house go into foreclosure, enter into bankruptcy, allow one party to reside in the house until there is a positive value, or let one of the spouses take over the house.  Each of these ways to allocate an upside-down marital residence has its’ own set of consequences.

Agreeing to sell the home and eat the loss is generally the most unlikely way to resolve this issue because most couples who are going through a Florida Dissolution of Marriage case don’t have the financial ability to pay the difference between the sales price and the total amount that is owed.

Our Florida Supreme Court Certified Mediators have found that it can be difficult for two spouses going through a Florida divorce to agree to let their former martial residence go into foreclosure due to the credit issues.  This is because usually one of the spouses believe that he or she has a much better credit worthiness that this spouse desires to maintain after their divorce becomes final.  The same belief about better credit worthiness also makes it problematic for the spouses to enter into bankruptcy to resolve their upside-down mortgage.

When one spouse allows the other to reside in the house until there is a positive value with the idea that the at some point the house is sold and the house is sold with the net proceeds being divided raises some very unique issues.  The main issue with this scenario is that both spouses are usually required to share the mortgage and major repairs until the house is sold.  Often, the party who doesn’t reside in the former marital residence believes that he or she is supporting the ex.  In addition, what happens if all of a sudden, the house needs a new roof or a/c unit and neither former spouse can afford their share.

Letting one of the spouses take over the house is generally the solution, but only will work if the other spouse doesn’t believe that he or she is handing over the former marital residence and receiving nothing in return.

If you have any questions about mediation, please contact our Florida Supreme Court Certified Mediators at Mediation of Coral Springs, Inc.