Divorce is a complex financial puzzle, and while most couples focus on the mortgage, there’s a sneaky financial trap lurking: the Home Equity Line of Credit (HELOC). If you’re divorcing and have an open HELOC, you’re at risk. These “future advance mortgages” can create major headaches if not handled correctly.

As a Certified Divorce Lending Professional (CDLP) in Metro Detroit, I’ve seen firsthand how HELOCs can derail post-divorce financial stability. Let’s dive into what you need to know.

HELOCs 101: Why They Matter in Divorce

A HELOC is a revolving line of credit secured by your home’s equity, like a credit card. Here’s why they’re a big deal in divorce:

• Shared Liability: If both names are on it, you’re both responsible in the eyes of the lender, even after divorce.
• Keeps Running: Unlike a mortgage, it doesn’t automatically transfer or close.
• Post-Divorce Draws: A disgruntled ex can rack up more debt.

The Dangers of Leaving a HELOC Open

1. Still On the Hook: Missed payments damage both credit scores, regardless of your divorce decree.
2. Surprise Debt: Your ex could max out the line, leaving you responsible.
3. Lenders Don’t Care About Your Decree: They want their money, regardless of who’s “supposed” to pay.
4. Refinancing Doesn’t Close It: Refinancing the mortgage won’t touch the HELOC. It must be paid off and closed.

Your HELOC Game Plan: Smart Strategies for Divorce

1. Pay It Off: Use savings or other assets to close it before the divorce is final, if possible.
2. Refinance It: If you’re keeping the house, refinance the HELOC into your name only.
3. Sell the House: If neither can take it on, sell and pay off all debts.
4. Freeze It: If payoff isn’t immediate, freeze it to prevent more withdrawals.
5. Legal Protections: Include clear terms in your divorce decree: payment responsibility, deadlines, and penalties.

Real-World Relief: An Ann Arbor Success Story

A couple with a $40k HELOC faced challenges when the husband couldn’t refinance right away, and the wife feared post-divorce withdrawals. As their CDLP, I:

• Helped freeze the HELOC.
• Advised on credit improvement for refinancing.
• Ensured the decree included a strict timeline.

The husband refinanced, and the wife was protected.

Your Next Steps

For Divorcing Homeowners:

Don’t let a HELOC become a post-divorce nightmare. Let’s discuss your options. Contact me for a free consultation.

For Family Law Professionals:

Partner with a CDLP to ensure your clients’ settlements address HELOCs effectively. Let’s collaborate!