What You Should Know About Divorce Liens
What is a Divorce Lien?
A divorce lien is nothing new. It is simply a note payable from one spouse (the one who keeps the major asset) to the spouse who gives it up.
You may find that all your marital wealth is tied up in one large asset… the house. A divorce lien may be a good solution.
Using a divorce lien… one spouse keeps the asset; the other gets a lien against the asset, also known as “paper”. This is usually (but not always) the wife keeping the house with the husband securing his interest with a mortgage on the house. One spouse stays in the house, keeping the children in a familiar environment.
The other spouse gets security that he will eventually be compensated for the equity he has in the house.
One Spouse :
- Keeps the house
- Avoids relocation expenses
- Has reasonable house payments
- Retains a fair share of the home equity
- Keeps the children in the same schools and neighborhood.
The Other Spouse:
- Has a mortgage lien on the house
- Gets cash by selling the mortgage note
- Has cash for expenses and obligations
- Has the cash to move to into house.
Example of a Divorce Lien: Brenda & Joe are Divorcing
They have agreed that: Brenda will keep the house.
- This allows Brenda to retain a fair share of the home equity
- Keep the children in the same environment Joe will get a lien on the house.
- This secures his interest with a mortgage on the house.
- Joe can opt to sell the lien for cash so that he can purchase another house.
Joe delivers to Brenda a deed to the house, conveying his share of the ownership. Brenda signs a note to Joe agreeing to make periodic payments and/or to pay a sum certain at some point in the future.
Brenda also signs a mortgage, called a “deed of trust” in some states. The mortgage would pledge Brenda’s interest in the house to back up her promise to pay as provided in the promissory note. This is usually a second mortgage, because the first mortgage stays in effect throughout this transaction.
If Joe decides that he needs cash, he can sell his lien on the house.
Filed under Divorce Lien, Property Liens 
