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    Whether to keep a house with no equity or 'negative' equity is a
    complex financial decision, even absent divorce. The options include:
    (1) sell the property and pay the deficiency out of pocket; (2) attempt
    a 'short sale,' in which the lender takes all proceeds in full satisfaction
    of the secured debt; (3) let the property go to foreclosure; or (4) have
    one or both parties stay in the property, pay the mortgage, and await
    better market conditions.

    A sale can be court-ordered under Maryland law. However, there
    appears to be no statutory provision for deciding who pays any
    deficiency.

    In 1989, the Court of Special Appeals (Maryland's intermediate
    appeals court) pointed out that "the court may not require one
    spouse to satisfy joint obligations of the parties such as mortgages
    and taxes on real property, ... or pay the interest on joint promissory
    notes." The Court recognized specific statutory exceptions, including
    mortgage payments for property subject to an order for use and
    possession.

    If the parties have minor children, use and possession of the family
    home, as well as family use personal property, may be awarded to a
    parent with custody for up to three years from the granting of an
    absolute divorce. During the period of use and possession, the
    mortgage and other carrying costs may be apportioned between the
    parties.

    In addition, a provision added to Maryland law in 2006 permits a court
    to order transfer of ownership of the principal marital residence from
    one party to the other, or to authorize one party to purchase the
    residence from the other on court-ordered terms. Unfortunately, these
    added powers are infrequently of any use when a house is 'under
    water.'

    Limitations on court-ordered remedies place a premium in these
    situations on mediated or negotiated agreements between parties.
What happens when a house is 'under water'
or 'upside down' and the owners want to
divorce?

NOTICE: None of the contents of this page constitutes legal
advice. To obtain legal advice, consult with an attorney. This is
especially important in divorce and family law matters, in which
outcomes are often peculiar to the particular facts and
circumstances of the case.
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