Q: I recently lost my husband to cancer. When he passed, I lost about two-thirds of our income. The house has two mortgages. My name is not on either mortgage or the deed.
I cannot make those payments and have moved to something I can afford. I told the bank to take the home. Will this affect my credit and can they sue me for anything? I have nothing left.
A: I’m deeply sorry for your loss. It’s hard enough to lose a loved one but it’s even harder when that event causes you a financial hardship.
In most cases, you should not be held responsible for your husband’s debt on the home. He owned the home and owed the debt. If the home retained its value and can be sold for what was owed on the home, the lender will be happy.
If the home is worth more than the outstanding mortgage debt, you would probably want to hire a real estate agent to sell the home. You can talk to a real estate attorney about how to go about selling the home and if things work out, you maybe could come out with some cash from the sale.
If, however, the loan exceeds the value of the home, you’re probably better off letting the lender handle the issues relating to the home from now on. But if you go down that route, you’d better make sure that the bills that can come to the home are not in your name. You don’t want to move away from the home and not pay the electric bill if it’s in your name and have your credit hurt by your failure to pay those bills. If truly all the bills were in his name and you have walked away from the home, it’s unlikely that you would have any liability for those debts.
In some states, spouses that benefit from services rendered to their spouses can be held accountable for those debts. But if the only debt you are dealing with is the mortgage on the home, you’re probably fine moving on. Just to be sure, you might want to talk to an estate planner in your area or an attorney that deals with collection defense.
Finally, you should know that in some states even if the lender is not satisfied and paid in full upon the sale of the home, that lender can’t come after the person that owes the debt. That amount owed is called a deficiency and the lender would attempt to obtain a deficiency judgment to get more money from the borrower.
If, as you have said, you’ve not only lost a loved one but don’t have much in terms of assets, banks are not willing to spend good money trying to recover more money from a person whose ability to pay is quite low.