When negotiating a divorce settlement, many spouses assume that if one party agrees to take responsibility for a mortgage, the other spouse will automatically be removed from the loan.
A recent California appellate decision reminds us that this is not necessarily the case.
The Case: In re Marriage of McConnell and Jahnke
In McConnell and Jahnke, the parties reached a settlement agreement that awarded the marital residence and “all debts thereon” to one spouse. Both parties agreed that this provision made that spouse solely responsible for making the mortgage payments.
The dispute arose because the other spouse believed that taking responsibility for the mortgage also meant being required to remove him from the loan itself.
The Court of Appeal disagreed.
The court held that assigning responsibility for a debt in a divorce settlement does not automatically require the spouse receiving the debt to refinance, pay off, or otherwise remove the other spouse from the lender’s contract unless the agreement expressly says so.
Why This Matters
Many people are surprised to learn that a divorce judgment cannot simply force a lender to remove a borrower from an existing loan.
Even after a divorce, both spouses may remain legally liable to the lender if both originally signed the mortgage documents.
While a settlement agreement can assign responsibility for making payments, it does not automatically change the lender’s rights.
The Practical Takeaway
If your goal is for one spouse to be removed from a mortgage, your settlement agreement should clearly address:
- Whether refinancing is required
- The deadline for refinancing
- What happens if refinancing is not possible
- Whether the property must be sold if refinancing cannot occur
- Any indemnification or reimbursement provisions
The court in McConnell emphasized that judges will not add these terms after the fact simply because one party assumed they were included.
Why Careful Drafting Matters
In mediation and amicable divorce cases, settlement agreements are designed to provide certainty and avoid future disputes.
Unfortunately, vague language can create confusion years later, particularly when real estate and mortgage obligations are involved.
A well-drafted Marital Settlement Agreement should not only address who receives an asset or debt, but also clearly outline the steps necessary to implement the parties’ intentions.
Final Thoughts
This case serves as a valuable reminder that details matter.
If one spouse is keeping the family home and both parties intend for the other spouse to be removed from the mortgage, that requirement should be expressly stated in the settlement agreement.
At Aloha Divorce, we help clients create thoughtful, comprehensive settlement agreements that minimize ambiguity and support long-term stability after divorce.
This article is for informational purposes only and does not constitute legal advice.
