If your name was included on the original home mortgage, and you signed the loan agreement, you remain accountable for the payment of the loan even if your ex-spouse got the house in your divorce.
This is true even if your divorce decree says that your spouse agrees to take on the mortgage payment and “hold you harmless.” The inclusion of that language in a divorce decree is meaningless to the lender, and most lenders will ignore it. The lender is not a party to your divorce decree, so your divorce does not impact your outstanding debt to the lender. What this does do is that if the spouse awarded the house defaults, the other spouse can sue under the “hold harmless or indemnify” provision. Again, you can’t go after the lender, but you can sue your ex spouse.
In many cases, this will not be an issue. The spouse awarded the homestead will pay the mortgage as agreed. However, it can become a problem if the spouse awarded the homestead discontinues paying the mortgage. At that time, the lender will likely attempt to collect the outstanding debt from you.
A Minnesota trial judge said, “People who sign documents which are plainly written must expect to be held liable thereon. Otherwise, written documents would be entirely worthless and chaos would prevail in our business relations.” Watkins Products Inc., v. Butterfield, 144 N.W.2d 56, 274 Minn. 378 (Minn. 1966). In signing the original loan agreement, you agreed to the terms of the loan note and your signature indicates your agreement with the terms of repayment.
A solution would be to have your spouse agree to refinance the loan in his or her name. This would remove you as a co-lender, leaving only your ex-spouse responsible for repayment. This will not only prevent any future damage to your credit should your ex-spouse fail to make payments, but also discontinue any responsibility you have to the loan.
Another option is to simply sell the home. But, if there is no equity, all you are left with could be the “hold harmless and indemnify” language (see above). In summary, you need to know what the consequences are of a provision that states that your ex spouse will hold you harmless and indemnify you.
