What Can Courts do about Upside Down Residences?

Last night's Family Law Study Group presentation focused on what the court's can do about upside down mortgages in today's lagging economy.

Generally, in a dissolution, there is an "equal division of the community estate." With so many upside down residences, spouses are frequently awarded a home with negative equity at "zero value." But what if the court's were able to award a spouse the residence at it's actual negative value and offset that debt by awarding that same spouse more of another asset such as a retirement account? This has yet to be done in a California family law court, but given the prevalence of these situations and the negative effect of foreclosures on people's credit ratings, this area may be ripe for some creative new case law!

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