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Real Estate, Divorce and Section 42

Written by Edward Clark, Director of State Monitoring in MA

Real Estate often gives managers fits when trying to prove eligibility under section 42. So does divorce. When the two circumstances are combined with a manager confronted by an applicant in need of housing, things can get really stressful. Here’s some guidance:

 

1- Obtain a copy of the divorce decree and read what it says about distribution of assets. If the divorce is still pending, have the applicant contact their legal representative and obtain in writing the settlement proposal. It isn’t legally binding but it indicates what the applicant expects at that time (anticipated circumstances).

 

2- Read it. Highlight the relevant parts of the document if you can understand it.

 

Recently we were asked to classify the status of a house as it related to eligibility for a recent divorced husband. In his particular case, his ex wife was granted occupancy of the house that was owned jointly by her and the ex husband. She could live in the house as long as she made the mortgage payments. The deed to the house shows joint ownership and the mortgage lists both exes as jointly and severally liable for the mortgage. That means if the mortgage payments don’t get made, the bank has the right to go after either ex-spouse for the money owed.

 

The management company questioned whether or not the house should be considered an asset. A question was also raised about the mortgage payments. Since the applicant was just as responsible for the mortgage payments as the ex-wife, should the payments she is making be considered income for him? If you own a car and someone else pays for the insurance and gas, then those payments must be considered income when determining eligibility under the 4350, so shouldn’t someone else paying your obligations for a house be treated similarly?

 

But first, the house. Is it an asset? No. An asset is something that can be converted to cash. The value of an asset is the amount the applicant would walk away with after paying the expenses for converting it to cash. For this applicant, he cannot convert the house to cash because his ex wife is living in it and making the mortgage payments. Until she agrees to sell or refinance, he has no ability to turn it into cash. Therefore- no asset.

 

What about those mortgage payments? Should they be counted just like gift income? No. Each time the ex-wife makes a mortgage payment, she isn’t reducing his debt burden (it’s her debt too), she is increasing her share of the equity in the house. If they ever agree to sell (something he doesn’t control alone remember), then he could receive a pile of cash, and that would be an asset when it happens.
But not today.

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