Separate Property Versus Community States

• Laws about debt vary based on the state in which you reside. The majority of states, 41, are separate property states, or common law states. This means that the government holds each person responsible for their own debts and assets. The nine remaining states -- Wisconsin, Arizona, Washington, California, Idaho, Texas, New Mexico, Louisiana and Nevada -- are community property states. In these states, you and a spouse are treated like one financial entity. This means you may be liable for debt your spouse takes on and vise versa. It also means you have joint ownership in any property or other assets your spouse may acquire during your marriage. If you live in a community property state, your mortgage lender typically divides the mortgage debt equally between you and your ex if you divorce.
  
  

Joint Accounts

• Even if you live in a separate property state, you generally are liable for any debt on which you cosign. This applies to most mortgages taken out during marriages, as it is much easier to qualify for a mortgage using the income and credit score of both the husband and wife. If your name is on the mortgage loan, your mortgage lender has a right to come to you for payment even after you divorce.
  
  

Liability Amount

• Because of property laws involving debt, liability varies on a mortgage after divorce. If you've cosigned on the mortgage, your lender may seek the total amount of the mortgage from you if your ex doesn't pay, regardless of whether you live in a community property or separate property state. If you are in a community property state and your name isn't on the mortgage, your liability usually is limited to half because of the way the lender divides the debt equally between you and your former spouse. If you are in a separate property state and your name isn't on the mortgage, celebrate -- you aren't responsible for any of the mortgage debt.
  
  

The Refinancing Solution

• When facing divorce, if you have a mortgage and want to control your liability for the loan, the best thing to do is to refinance. When you do so, put the new loan only in your name or in only your spouse's name. If you put the new loan in your spouse's name, they take over responsibility. If you refinance in your name, you'll take on the debt completely, but you'll be able to control payments and can guarantee that your ex can't use a lack of payment to hurt your credit. You do not have to be on the title of a home to be paying on the mortgage loan.