No Credit for Negative Equity

The Issue
The married parties own a home or other real estate that has an appraised value that is lower than the amount of secured debt owed on the home.  This is often referred to as being "upside down" on your home.  If one spouse keeps the property in the divorce, can they request a credit against other savings or assets for their assumption of this negative equity?

The Apparent Answer
There is no currently published (or unpublished) court of appeals or supreme court decisions in Michigan directly addressing this relatively new phenomenon.  It appears that the circuit court judges are not willing to grant the party that assumes this potential liability a credit against other assets.  There are several potential reasons behind these decisions.

1. The parties are both still liable on the note or underlying debt.  Even if there is a hold-harmless or indemnification clause, if the party that takes the house then walks away and stops paying, the note holder (bank) can still sue both parties on the debt.  The divorce judgment cannot force the bank to remove one of the parties from the liability associated with the same and if the parties owe more money on the home than it is worth, in most cases the bank won't agree to remove one name or allow refinancing.  So the party that does not keep the house may still be sued on the liability despite the divorce judgment and the hold harmless clause may be useless if the spouse that kept the house is "uncollectable".  Finally, if this situation occurs and the spouse that kept the house was given additional property to credit them for this liability, then the other spouse is facing a double loss, the loss of the property and getting sued for the deficiency by the bank.
2. The court believes that there is greater value to the party that keeps the house than the appraised value.  The court looks at the holder's value of the property rather than the appraised value.  The court thinks that if the person is willing to keep the house despite this apparent negative equity that it must be worth more to that person than the general home buying public, perhaps due to the children's school, some amenities in the house or the party really just doesn't want to move.
3. The court may look at the house like the stock market, the value is down now but it will go up.  If one party wants to keep the house, then they must bear the risk of loss as well as the potential benefit of gain.

There are likely other reasons that the courts have not wanted to grant a credit for the negative equity, but these are some potential reasons.

Solutions to the Negative Equity Issue

1. The parties can sell the house and come to the table with money from joint funds for the deficiency between the proceeds from the sale and the overall debt.
2. One party can keep the house and then agree to sell it in a set number of years to wait and see if the market goes up and then divide either the debt or the gain.  The parties must then decide what will happen if the spouse responsible for paying the debt defaults and how to handle the payment of taxes and the deductions for payment of the mortgage.
3. The parties could short sell the home.  In a short sale, one of the parties will have to include the difference between the sale price and the debt as income on their tax returns.  The parties must work out a mechanism to share the taxes on this reported income.
4. Finally, both parties could walk away from the home, allow the foreclosure and both will potentially face the bank filing a complaint against them to collect the deficiency in the future.  

These are only some potential ways of dealing with this solution.  The parties divorce lawyer must be creative but practical as there are several potential pitfalls in this evolving area of divorce law.

E-mail, Privacy and Divorce in Rochester Hills, Michigan. Tips for Avoiding Confrontation or Being Charged With a Crime

Reading a spouse’s e-mail and discovering information that might lead to a divorce has been considered a crime in Rochester Hills, Michigan by the Oakland County Prosecutor. An article by L.L. Brasier in the Detroit Free Press, December 28, 2010 reported this issue.


First, to those people that are engaged in some activity or communication of any type (including consulting with a divorce lawyer) of which they do not want their significant others or family members to have knowledge please read the following tips to avoid being discovered by your spouse.

• If you are going to communicate by e-mail, you should make sure to change passwords for the account frequently and not write the password down anywhere that your spouse has access.

• It is not a good idea to post anything negative about your spouse or an affair on Facebook or other social sites for many reasons. One reason is that if you post a comment and then someone that has your spouse as a “friend” in their Facebook account makes a comment about your comment then that will post both to your spouse’s (or ex-spouse’s) Facebook page.

• It is also not a good idea to text someone you do not want your spouse to know that you are contacting, take pictures on your phone of any activity that you do not want your spouse to see or even call someone that you do not want your spouse to know you have contacted. People often leave their mobile communication devices around where their spouse or significant other may have access to it and it is very easy to see what numbers have been called recently and redial any that seem suspicious.

Regarding the case above, I cannot tell you how often in my practice over the last fourteen years that I have heard of one married person reading their spouse’s e-mail, social networking site, mobile phone or even their mail after suspecting that they were having an affair.
In the above case the husband took the issue one step further and provided the letter to father of his wife’s child because the person with whom she was having an affair had reportedly beaten her in front of this child. This passing on of the information to the third party is probably what caused the prosecutor to even consider charging him. If it was merely a case of reading the e-mail and confronting his spouse, then there is really no way that this should have been a charge against him.

As it stands, it still seems somewhat ridiculous for the prosecutor to charge him with a crime, as the two lived together at the time, they both used the laptop computer that he used to obtain access to her email account, and the wife apparently left her passwords for different accounts in an unguarded notebook next to the computer. Further, the prosecutor has apparently charged him under a “hacking statute”, which seems unrelated to domestic relationships.

The temptation when someone has suspicion of extramarital activities to snoop in general or particularly to access the e-mail or Facebook account of their significant others is simply too great, especially where the person knows the password or the password is written down in an accessible spot. Charging this man with a crime really opens a massive can of worms that should be left shut. How many people that have gone through a divorce or are currently going through a divorce where this type of information was used against them are going to be contacting the prosecutor at this point and where does she draw the line?

Finally, if the prosecutor starts prosecuting these types of cases, then there are going to be very many people that are technically breaking the law when they access the e-mail or mobile phone of their spouse, possibly even in inadvertent or relatively innocent cases. For example, your spouse leaves his telephone at home open to his photo album and you look through the album expecting to see some nice pictures of your children, but instead you are confronted of him posing with a woman that you do not know. Does this make you guilty of a crime?

I do not recommend that anyone have an affair, however, it seems foolish to open oneself to this easy exposure by using the mobile telephone for any of the above activities. Think hard before engaging in this type of activity anyway, because the joy one may get from it may be short lasted and the damage that it may cause if discovered can be huge and irreparable. In Rochester Hills Michigan it appears that accessing your spouse’s e-mail or even their mobile phone may not only lead to divorce, but also to criminal charges.

Please visit my website for more information regarding divorce or family law at http://camerongoulding.com/default.aspx


DISCLAIMER: This information is provided for general educational purposes only including answers posted to questions at Ask Cameron. It is not intended to be relied on as legal advice. This information may not have been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and any changes in the law, must be considered to determine appropriate legal advice. Always consult with a competent attorney, licensed in your state, to discuss your particular situation. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship between you and Byers & Goulding, PLC and/or Cameron C. Goulding. Please do not send information to us that you consider confidential without first obtaining:
1. A written statement from us that we represent you (a "retention letter") and
2. Permission from Byers & Goulding, PLC or Cameron C. Goulding to provide
Confidential information to us relating to a particular matter.
This information is not guaranteed to be correct, complete or up-to-date. It should not be relied upon or construed as legal advice. You should not act or elect not to act based upon this information without seeking professional counsel. Byers & Goulding, PLC has its office located in Auburn Hills, Michigan. We do not wish to represent anyone in any state in which this information may not comply with all applicable laws and ethical rules, or to represent anyone with respect to legal matters related to the laws of any state or country in which our lawyers are not admitted to practice law.

What are Post Nuptial (Postnuptial) Agreements and are they valid

A post nuptial agreement is basically a prenuptial agreement that a husband and wife prepare and sign after they are married. In my practice, located in Rochester (Auburn Hills), Oakland County, Michigan, I refer to these documents as “midnuptial agreements” because the couple is really signing these agreements during the middle of their marriage when they are not (at least openly) considering imminent divorce or separation. If the couple is contemplating divorce or separation in the immediate future, then that is referred to as a “separation agreement” or “property settlement agreement” and it is advisable to first file a complaint for legal separation (separate maintenance) or divorce before signing such a contract otherwise it may not be valid as discussed below.

It is my opinion that a properly drafted postnuptial agreement is valid in Michigan and will be upheld by the courts. In a 2008 Michigan Court of Appeals case, Wright v Wright, 279 Mich App 291 (2008), the author of the opinion, Judge O’Connell, stated that such agreements were against public policy. However, at the 9th Annual Family Law Institute Seminar on November 12, 2010, Judge O’Connell stated verbally and in his written materials that this was an “oops” and that he was wrong in stating this in such a manner.

In my opinion what this means is that the agreement in the Wright case was not valid because it encouraged the husband to divorce his wife, was written in contemplation of divorce and that the particular agreement in that case was against public policy, not all post nuptial agreements. I have in fact written “midnuptial” agreements which the parties agreed to follow when they divorced which avoided the requirement of litigation.

The basic requirements for post nuptial agreements are the same as prenuptial agreements however there are at least two additional issues one must address. Those two additional issues are:

• consideration or what is given or bargained for to support the contract and make it legally binding and
• the agreement must not be made in contemplation of divorce, (whereas a prenup must be made in contemplation of marriage).

For any contract to be valid and legally binding, there must be consideration, in the example of an employment contract, one party agrees to work for the other and the other party agrees to pay the worker for that work, this is called consideration. In a prenuptial the consideration is the exchanged promise to marry, each person is promising to marry the other and this exchange of promises is the consideration to support the contract. In the post nuptial agreement, the person that prepares the contract must state in the document the consideration that will support it and make it legally binding.

The promises exchanged cannot be for one party not to file divorce, leave the marital home or stay in the marriage. The family law attorney drafting the agreement should write the agreement very carefully and indicate that the intent of the parties is to enter into an amicable settlement of property issues and not to contemplate or facilitate divorce or separation. If a jduge believes that the intent of the contract was to facilitate imminent divorce or separation that is against public policy in Michigan and the written agreement will not be upheld by the court. This does not mean that the agreement cannot discuss divorce or separation, again however, the divorce lawyer writing or drafting the agreement must be very careful to avoid the appearance that the agreement would encourage one of the people to file for divorce or facilitate the couple’s separation.

A postnuptial agreement will be reviewed by the court under a fair and equitable standard which is a legal term of art and involves procedure as discussed below and it should not be taken literally. While a separation agreement or property settlement agreement are reviewed under general contract principles which means in most cases that even if it is not fair at all to one party, it is still binding so long as procedural requirements are met.

• the other requirements (which are the same for both prenuptials and post nuptials) for a valid and binding “midnuptial” (or prenup) are:
• the agreement cannot be obtained through fraud, duress or mistake,
• the agreement cannot be unconscionable/unfair when signed,
• the facts and circumstances cannot have changed so much in an unforeseeable way since the date it was signed that it would be unfair and unreasonable to enforce it,
• both parties must enter into the agreement voluntarily and
• both parties must disclose all assets and facts before signing the agreement.

The above factors include terms which are legal terms of art and include procedure and legal definitions so they do not necessarily mean what they would in the common usage of our language, particularly with regard to “fairness” and “foreseeable”. The above five factors are complicated and are a separate topic in among themselves.

If the family law attorney or divorce lawyer carefully drafts the postnuptial contract then it should be enforceable in Michigan and can be a valid substitute for a prenuptial contract if you did not get one before the marriage.

DISCLAIMER: This information is provided for general educational purposes only including answers posted to questions at Ask Cameron. It is not intended to be relied on as legal advice. This information may not have been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and any changes in the law, must be considered to determine appropriate legal advice. Always consult with a competent attorney, licensed in your state, to discuss your particular situation. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship between you and Byers & Goulding, PLC and/or Cameron C. Goulding. Please do not send information to us that you consider confidential without first obtaining:
1. A written statement from us that we represent you (a "retention letter") and
2. Permission from Byers & Goulding, PLC or Cameron C. Goulding to provide
Confidential information to us relating to a particular matter.
This information is not guaranteed to be correct, complete or up-to-date. It should not be relied upon or construed as legal advice. You should not act or elect not to act based upon this information without seeking professional counsel. Byers & Goulding, PLC has its office located in Auburn Hills, Michigan. We do not wish to represent anyone in any state in which this information may not comply with all applicable laws and ethical rules, or to represent anyone with respect to legal matters related to the laws of any state or country in which our lawyers are not admitted to practice law.

Cheating Husbands and Wives in Oakland County Michigan Divorces

If my husband or wife has “cheated” on me, or has otherwise been unfaithful, will it make a difference in my divorce is a question that many people have when they find out about an affair. The answer, in Oakland County Michigan Family Law Courts or Divorce Courts, is yes and no.


I recently have answered many questions that start with “my wife (or husband) met someone on FaceBook and …” In Michigan, we have no fault divorce, so one does not need to state a reason to get a divorce. The real question seems to be whether one will have an advantage for property settlement, alimony (spousal support) or child custody.

Regarding child custody, it does not seem to make a difference whether one party has been unfaithful during the marriage, unless the new partner has some criminal history or is otherwise dangerous to the children. This is true even though moral fitness of the parents is a factor that the courts must take into account when determining custody.

Regarding property settlement, the court may take into account whether one party has been adulterous. However, most judges do not really want to hear these type of details and the party accusing the other of having an affair, must be very careful not to overemphasis this in court. The judges often take a “chicken or the egg” type approach and assume that both parties have wronged one another at some point during the marriage and that there are many reasons the parties are getting divorce.

Regarding alimony (spousal support), the court may take into account whether one party has had an affair during the marriage. Again, as with property settlement, one must be careful not to get caught up in attempting to punish the other party for this during the divorce. It is one factor that taken together with other factors may make a significant difference, such as the length of the marriage, the parties’ relative incomes and the egregiousness or repetition of the activity. However, judges will generally not attempt to punish one party for this type of activity.

In addition, Judges are very skeptical (as should be most people) of anyone that tries to paint themselves as a complete victim and one’s attorney must be very careful when presenting evidence to avoid this perception. The answer to whether a cheating husband or wife will allow one to get a better settlement then is technically yes, but in reality there are many other factors that courts in Oakland County Michigan consider far more important in a divorce case.

Abandonment & Divorce – Legally Speaking

I have been a divorce lawyer in Oakland County Michigan for many years and over the years I have often been asked at the initial meeting “Will I face abandonment issues in my divorce because I moved out of the home or if I move out of the home?”


Fortunately, unlike many issues in divorce, there is a simple answer to this Question. No, you will not. This is true in Michigan and it should be true in any “No-fault” divorce state if you do not live in Michigan.

The explanation is a little more complicated and involves a little history in Michigan Family or Divorce Law. Until the 1970’s, Michigan law required a person that had to get divorced to state a specific reason for the divorce, such as abuse or abandonment on the record. If the person did not state a sufficient reason, the judge could deny the person a divorce. This caused unnecessary embarrassment, humiliation and other more serious issues to innocent people that needed to get divorced.

Abandonment or desertion, as it was technically called in Michigan, was repealed as a basis for divorce when Michigan instated the “No-Fault” rules for Divorce. The statute repealing Abandonment or Desertion as a grounds for divorce in Michigan is MCL §552.9d. (You may review this statute at http://legislature.mi.gov/doc.aspx?mcl-552-9d.)

Michigan no longer requires a person to state specific grounds for divorce. Typically a person recites the phrase “there has been a breakdown of the marital relationship to the extent that the bonds of matrimony have been destroyed” and this is sufficient. Desertion of a minor child is still a felony in Michigan however this really has no relation to the question as posed in relation to a divorce, where one party has moved or plans to move out of the house. The felony non-support statute in Michigan is MCL §750.164.  (You may review this statute at http://legislature.mi.gov/doc.aspx?mcl-750-161.)

I do offer the following advice as an experienced litigator, attorney, divorce lawyer and compassionate human being to those who ask me the Abandonment question.

You should continue to pay the bills and support your children as you did during the marriage after you or your spouse move out of the home. For example, if you each paid certain bills, you should continue to pay the bills for which you have been responsible. Let your spouse know that you are paying those bills and you anticipate that they will continue to pay the other bills they have paid. If each of you puts money into an account and the bills are paid out of that account, you should continue to do that absent another agreement however if you are not the party that has been in “control of the checkbook” then I highly suggest that you speak to your spouse about dividing up the bills and opening separate accounts, to allow yourself the ability to open your own bank account and have some control over your own finances. Please contact me to discuss this strategy and why it is very important to do this before you or your spouse file for divorce if you can.

If you cannot pay your bills, that is an issue that you should discuss with a financial advisor, credit advisor or bankruptcy attorney, depending on the extent of the issue. I would be happy to refer you to a trusted financial advisor, credit advisor or bankruptcy attorney if you contact me online at http://camerongoulding.com/contactus.aspx. Who knows getting your financial issues in order may help your marital issues and should certainly reduce the horrible stress and anxiety that you must be facing.

Michael & Diandra Douglas: why greed, anger and revenge have no place in Oakland County Divorce Courts

I read in the New York Post online edition today that Michael and Diandra Douglas are once again back in a family law court, this time in New York.  This unfortunate couple filed for divorce in California over ten years ago, however, this week, Diandra filed a motion in the New York divorce courts seeking half of Michael's share of the proceeds of his most recent film which is set to release in September.  Ten years later and she still wants half, how can this be?

Legally, it is simple.  Basically, in California (as in Oakland County Michigan, even though we are not a community property state) any income earned through the actions of one spouse during the marriage is considered joint income of the married parties.  In addition, any property rights obtained through the work of either parties during the marriage is considered to be a marital property right.  In the Douglas's case, it appears that Michal Douglas entered into the contract for the movie "Wall street" (a classic) and performed the role of "Gordon Gekko" while he was married to Diandra.  Therefore, she was entitled to fifty percent of the proceeds from that movie.

The judgment of divorce then dictates how parties to a divorce will divide all of the income, assets and property rights earned during the marriage.  This is the tricky part.  Apparently, Diandra's attorneys must have included in the judgment a fifty percent share of Michael's contractual right to any "residuals, merchandising and ancillary rights" to the original movie "Wall Street".  The new movie is a sequel and that's the rub.  The judge in New York must now read the judgment, listen to argument and determine whether Michael and Diandra intended to include a sequel in the list of rights that she obtained to "Wall Street".

There are two lessons to be learned in this sad tale.  First, the importance of a well crafted judgment of divorce that includes all foreseeable possible future issues cannot be underestimated.  It is imperative to have an attorney draft this document in an exhaustive and meticulous manner, because often, as in the Douglas case, when parties continue to antagonize one another after the divorce, the decision will ultimately come down to the wording of the judgment.

The attorneys may have been able to avoid this issue by stating exactly what rights she has and what rights she does not have regarding each of his projects.  For instance, according to the article, the parties argued about "spin-offs"  in court as opposed to "sequels".  If this is true, Michael's attorneys probably should have specifically included language stating that rights to spin-offs are included but sequels are not included.  This open loop allows Diandra to get her foot in the door and proceed with legal argument.  This could be an extremely expensive error for Michael if he indeed did not intend to grant the rights to sequels in the judgment of divorce.

The second issue is that this case has a byline, Michael and Diandra have a son that is now in his twenties.  He is allegedly a drug dealer and has been convicted of drug related offenses.  During the hearings seeking leniency for his son in recent months, Michael could not help himself, he took the opportunity to besmearch his ex-wife, blame her for their son's problems and denigrate her parenting skills in open court.  This is obviously inappropriate testimony at his son's sentencing, however, Diandra made outrageous claims against Michael during the original divorce case which made him out to look like a sexual deviant.  In addition, it appears that she has used the divorce court system in an attempt to punish, humiliate and extort Michael.

The point is that both of these parties started out on the wrong note and carried forward this cacophony together.  They brought their anger and sense of need for vindication into court and used the courts to attempt to punish the other party and release their anger against the other party, which creates a vicious cycle indeed.  Frankly, in most cases most judge (in Oakland County divorce cases at least) do not put much weight on the many wrongs that parties have committed against one another, therefore, all this serves to do is fan the flames of litigation, which in turn prolongs the proceedings and has horribly negative effects on the parties' health, finances, welfare and most importantly, their children.

Perhaps this ten year saga of misery could have been avoided.  Is she had not started out trying to create scandal and misfortune or to punish him in court, or if he had decided not to hold onto his anger as shown by his recent statements at the leniency hearing, maybe they would not be in court in New York now interpreting the technical meaning of terms their attorneys put together for them in California a decade ago.

I am Cameron C. Goulding, a divorce lawyer practicing in North Oakland County Michigan for over fourteen years, for more information or to contact me please visit my website http://www.camerongoulding.com/ or call for an appointment at (248) 340-0900.  I provide the highest caliber family law services to Rochester, Rochester Hills, Bloomfield, Troy, Lake Orion, Oxford, Waterford and the surrounding communities in Macomb and Genesee.     

Divorce and the marital residence in this rotten real estate market; four solutions

The marital home or residence was once the greatest asset of the marital estate. In many cases, it has now become an albatross. Clients and potential clients are very concerned today, among other financial/economic issues, about the value of their homes in relation to the market and their mortgages.  This is particularly true in areas such as Rochester and Rochester Hills where Chrysler purchased a large number of homes for executives and other employees whom are no longer living in the area and these very nice homes are sitting vacant on the market.

Many people considering divorce are concerned that, after they are divorced, they may not be able to sell the residence or, perhaps worse, may have to reside together after the divorce if they cannot sell the home. This is of a particular concern when the house is "underwater", where the appraised value of the home is less than the balance of the mortgage (or mortgage and equity loan or second mortgage.) This is known as a deficiency; the difference between the value of the home and the balance of the mortgage and often the costs associated with attempting to collect the balance.

There are at least four basic solutions to this problem.

First, the parties can attempt to work together to solve these issues. Often one party is willing to stay in the home and "ride the market out." This may require some concessions from the party that does not retain the marital home, however, if the parties can agree, this can save them from facing a certain instant deficiency where they will have to come up with money at closing from other sources of savings.  In addition, characterization of payments between the parties as spousal or family support may allow the parties to take advantage of income tax differentials and overall save the parties some money in the form of taxes.

Second, the parties can sell the home at the best possible price and take money out of retirement funds to cover any deficiency. While this is not an optimal solution, it is often effective. The money can be drawn without penalty at the time of the divorce and brought to the table. This allows the parties to move on without one party bearing more risk and maintaining the mortgage payment alone.

Third, the parties may attempt to broker a short-sale of the property.  In a short-sale the parties, the realtor and the bank representative work together to sell the property at the best possible price and obtain a release from the mortgage.  This appears to be a good solution, however, I have heard that the length of time that it takes to complete these transactions can be significant and they appear to have a problem with falling through at the final moment. 

Fourth, some clients allow the home to go into foreclosure.  Unfortunately, some couples faced with divorce have homes where they cannot afford the monthly mortgage payment alone and the deficiency is so large that it does not make sense for either party to keep the home.  In this situation, some clients have allowed the home to go into foreclosure.  During the foreclosure period, the client usually is allowed to stay in the home even though she is not paying the mortgage.  In this case, the client can save the money that would be used to pay the mortgage to apply to a new residence.  Unfortunately, this leaves the couple both open to liability for the deficiency and the bank may sue either party in an attempt to recover the deficiency.

These are only four potential solutions. There are many possible ways of dealing with this issue and the divorce process can be very flexible if the parties are able to "get along" in order to move on with their lives. A solution can be fitted to every situation.

I am Cameron C. Goulding, a Divorce Lawyer practicing in Oakland County Michigan for over fourteen years.  If you would like more information or to contact me please visit my website www.camerongoulding.com or call me at (248) 340-0900.