Divorce property not yet paid off – what now?

A divorce is not only an emotionally taxing experience for both soon-to-be ex-partners. For property owners in particular, the division of assets often proves to be a major problem. How should jointly owned property be divided, and above all: how should joint financial obligations be resolved?

In the event of a divorce, the first step is usually to consult a lawyer. Once the basic issues have been settled, a professional real estate agent is often brought in to find a solution for the jointly owned property. Before contacting the agent, it is advisable to review the purchase agreement for the property.

Problem 1: Only one partner is liable for the loan

As a general rule, the person who signed the loan agreement is liable for payment. The marital relationship is irrelevant. Therefore, if only one spouse signed the loan agreement, only that spouse is responsible for repayment. The other spouse is not liable, even if they are also listed in the land register.

Solution: In this case, it makes sense for the partner providing the financing to take over the property. However, if the other partner wishes to remain living in the property, compensation through rent payments or an adjustment of alimony is a viable option. In exceptional circumstances, the spouse who is solely responsible for paying off the debts in a divorce may also assert claims for compensation. This applies particularly if this partner does not remain in the house but instead relinquishes it to the other party.

Problem 2: Both partners have signed the loan agreement

The situation is different if both partners have signed the loan agreement. In that case, both are liable for the loan, regardless of whether one partner is currently using the property. If the owners are able to amicably divide their assets, they can try to speak with their bank and have the loan agreement amended so that only one partner is responsible for the payments. However, such an amendment also depends on the bank's willingness to accommodate the loan.

Solution: If a contract amendment is not desired, the separated partners must also agree on a settlement. One option is to draw up a debt release agreement. This means that only the primary earner is responsible for making the payments. However, if the partner obligated to pay becomes insolvent, the former partner will still be held liable, as the debt release agreement is not legally binding with the bank.

Binding agreement on maintenance payments

A legally binding agreement between spouses is reached regarding spousal support payments. The loan repayment is deducted from one partner's income, which is used to calculate support. This results in a lower actual support payment. In this way, both partners contribute to the loan payments, even if only one spouse still lives in the property. A professional real estate agent is familiar with such situations and can help you find the best solution for an amicable division of assets in the event of a divorce.

Are you unsure what to do with your property after your divorce? Contact us! We'd be happy to advise you on your options.

You can find more information here:

https://de.statista.com/statistik/daten/studie/76211/umfrage/scheidungsquote-von-1960-bis-2008/

https://de.statista.com/themen/133/immobilien/

https://de.wikipedia.org/wiki/Scheidung

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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