Must a divorcing husband and wife share the deficiency from a foreclosure sale of the marital residence in Virginia?
Yes, in the case of Austin v. Austin (Case No. CL08-1673, June 21, 2010), the Roanoke County Circuit Court found that the parties incurred the debt jointly, and, thus, the deficiency debt from the sale of the former marital residence was marital debt and should be divided equally. In addition, as the wife had earning ability that her husband did not, and Court ruled the wife should pay spousal support to the husband. The court also stated, given the amount of marital debt, that “[b]ankruptcy appears to be a consideration for each of them.” The Austin case stands in contrast to the Reidy case discussed earlier, where the Loudoun County Circuit Court refused to equitably divide marital debt resulting from an overmortgaged house, as discussed in answer to the question, “ Would a Virginia divorce court order a couple to allow the former marital residence to go to foreclosure?”.
In Austin, the husband and wife were married in Virginia for seventeen years before separating. Ten years into the marriage, the husband began suffering serious health problems, including kidney and heart problems. Shortly before the divorce, the husband was completely disabled, living on spousal support, Social Security, Medicare, and gifts from his family. He sought a no-fault divorce, spousal support, and a monetary award under Virginia’s equitable distribution section, Virginia Code § 20-107.3, arguing that the wife had squandered money for her own purposes, placing him in an economic hardship because she continued to borrow money against their jointly owned home during the marriage to pay off her separate credit card debts. Under Virginia Code §20-107.3, the Virginia Circuit Court judge has the power, upon granting a divorce, to make a monetary award to one party from the other for the purpose of creating an equitable distribution of the marital assets. Under the husband’s interpretation of the facts, he alleged he was entitled to the receipt of this award, because his family had placed significant equity in the marital home, and, due to the wife’s irresponsibility, he lost his potential share of the profit from their home.
The wife’s testimony, however, presented a different story. She claimed the parties never pooled their income. While her husband paid half of the house note and some food expenses, she bought most of the household furnishings, clothing, vacations, and the swimming pools installed at both their first and second homes—purchases made on her credits cards, because her husband had bad credit. Moreover, she contended that her husband wasted his money on alcohol and crack cocaine, and his habits exacerbated his medical conditions and contributed to his body’s rejection of a donated kidney.
Upon examination of the parties’ testimonies, the Court found that both husband and wife spent beyond their means, jointly and separately, throughout the marriage. The divorce judge found that the standard of living established during the marriage was beyond the parties’ economic means. The wife was employed as a social worker in her brother’s business supporting disabled individuals, and in that position, she earned only about $48,000 per year when the parties separated. Following the marriage, the wife has incurred $60,000 in unsecured debt, and the husband has a debt of approximately $25,000, making them both candidates for filing for bankruptcy. The court noted that bankruptcy appeared to be a consideration for both parties.
The Court in Austin v. Austin also ruled on the issue of spousal support, finding that the wife owed the husband monthly support. Although the each of the parties alleged that the other had committed adultery, the claims were not proved. The Virginia Circuit Court judge, however, ordered support for the husband because he lived on income from his disability without any earning potential, while the wife had a college education, earned a decent living wage, and was in good physical condition. Moreover, because of both parties’ excessive spending, the Court, after considering the equities established in Virginia Code §20-107.1 (E) determined an appropriate budget and found the wife had the ability to pay support for her husband.
You should consult with your Virginia bankruptcy and divorce lawyer concerning whether a mortgage deficiency should be divided between the parties.