Housing issues are a problem in most Florida divorces right now because a number of homes are upside down or underwater and in Florida, properties, assets and debts are to be divided equally. The courts struggle with this situation because even if the home is underwater it must still be factored into the equal distribution process. In addition, courts are aware that many people are now walking away from their homes and surrendering them into the foreclosure world. However, as a Jacksonville divorce lawyer, I prepare my clients for the house payments and associated insurance and related expenses because it is a factor in determining the outcome of the divorce and what debts may client may assume. Many people, even today, are hesitant to walk away from a house due to the impact it will have on credit and future purchases while trying to rebuild after a divorce.
Recently, a Florida appellate court evaluated this situation in Byrne v. Byrne, 3D10-2323 (Fla. 3rd DCA January 18, 2012). In the case, the parties had a condo that was $76,000 underwater. Originally, the Wife wanted to keep the home and make payments towards the property so as not to ruin her credit. She was initially awarded the home in the divorce, but was given no consideration by the court regarding the negative equity that she was taking ($76,000 would be owed upon sale). The trial court, in its initial decision, noted that there was a presumption that the Wife would actually turn the keys over the bank in foreclosure and would subsequently not lose the $76,000.
An appeals court is where one takes his/her case if the outcome of the initial case is factually or legally incorrect based on the evidence that is presented at court. Often, a transcript of the original trial will be necessary to preserve the evidence for the appeals court because the court transcript provides a formally written account of all statements made in the courtroom. Typically, a transcript is typed by a court reporter and since all witnesses are sworn in, their statements in court are sworn to statements that can be typed up and presented to the appeals court for review of all evidence.
In this case, the third district court of appeals in Florida considered the order entered by the trial court in the divorce and ultimately found that while the court was rational in its thought that many people are walking away from their homes. However, the appellate court also determined that there still must be consideration for the debt in the equal distribution of assets and debts because the bank may still come after the Wife for a deficiency (Husband too if the mortgage still has his name on it.).
The reality is that the judges are limited in their knowledge of the case because they only get to hear what is presented at court. While the parties may negotiate outside of the court and go to mediation, those negotiations are confidential and cannot be used at trial. Therefore, the judge may hear that a party, like the Wife, wants to keep the home, while in negotiations the Wife tried to give the debt of the home to the Husband because she did not want to have to deal with the mortgage, repairs and the like on a money pit. Ultimately, the courts have a duty to err on the side of the law and in Florida the law is for equal distribution of assets and debts regardless of what the party will actually do with the debts after the divorce (e.g. bankruptcy of all credit cards).