Getting Divorced With an Underwater Mortgage

 Posted on June 05, 2025 in Asset Division

In June 2025, many Illinois homeowners are still facing negative equity due to interest rate spikes and a cooling post-pandemic real estate market. If you and your spouse are trying to divide debts during a divorce and your mortgage is upside down, the process will require careful financial planning and a clear understanding of your options for handling your marital home. For help with this and other complex financial issues in your divorce, call our experienced St. Charles, IL divorce attorneys today. Our lead attorney is a Certified Financial Litigator.

What Does It Mean to Be "Underwater" on a Mortgage?

Being underwater means you owe more on your mortgage than the current market value of your home. For example, if your mortgage balance is $280,000 but your home could only sell for $250,000, you are $30,000 underwater.

This matters in a divorce because neither spouse can "take" the house without also taking on its debt,  and that debt may outweigh the value of the home. A mortgage like this is not just a shared obligation. It is a financial burden that must be divided as part of the marital estate.

How Is Negative Home Equity Handled During Divorce?

In Illinois, all marital debts and assets are divided fairly under 750 ILCS 5/503. The house, even if it has no equity, is still a marital asset if it was purchased during the marriage or paid for using marital funds.

When a home is underwater, divorcing spouses generally have three options:

• Sell the house and split the loss, either by bringing cash to closing or negotiating a short sale with the lender

• Refinance the mortgage in one spouse’s name and agree on how to handle the remaining debt

• Keep the house jointly for some time, with a written agreement on how future payments and losses will be handled

If one spouse plans to keep the marital home, the court will want to see a realistic plan, including the ability to refinance, manage ongoing payments, and absorb the loss.

Can You Force the Other Spouse to Take Your Home Debt?

Illinois courts will not force one party to assume all the negative equity unless there is a compelling reason to do so, such as the other spouse’s agreement or a significantly unequal financial situation. The court may offset the debt against other assets or income, but in most cases, both spouses share responsibility for the shortfall unless they can negotiate another arrangement.

What if You Plan to Walk Away From the Home?

Walking away from a mortgage entirely — also known as strategic default — can have long-term credit and legal consequences. Before you consider that route, talk to a lawyer who understands the implications for divorce, debt collection, and credit reporting. If foreclosure becomes part of your divorce reality, your attorney can help coordinate the timeline and determine how liability will be shared.

Why Financial Expertise Matters in Divorce with Complex Finances

A divorce involving underwater property is not just about emotional closure. Perhaps more importantly, it is about limiting long-term financial damage. A Certified Financial Litigator like Tim Weiler brings legal experience and financial strategy to each case, helping clients assess risk, negotiate practical settlements, and avoid surprises.

Contact a St. Charles, IL Asset Division Attorney

When your mortgage is underwater, getting divorced means confronting difficult financial truths. An experienced Kane County, IL divorce lawyer with financial litigation experience can help you evaluate your options, protect your credit, and develop a long-term strategy. Call Weiler & Associates, Inc. at 630-331-9110.