When you married, everything seemed to fall into place. You found the person with whom you thought you would spend the rest of your life. Maybe shortly after married you found a home that you liked in Edina or Roseville. Unfortunately, sometimes things that fall into place can later fall apart.

Now as you have come to the realization that your relationship is no longer working, you are preparing for a divorce. Traditionally, part of the divorce process includes a splitting of marital assets. But if you purchased that home in a the last few years, when the housing market was much healthier, you may find that rather than having to determine how to divide your assets, you are instead faced with the question of how to split the negative equity, or debt, in your house.

When a couple is upside down on their home, the situation can be more complicated. There are several options to consider when dealing with a house that is now valued at an amount less than the outstanding mortgage.

In some situations, it may make the most sense to simply sell the house. In this scenario, both parties find new homes and try to sell the house for as much as possible. But if you are underwater, you will likely have to either pay out the difference between the sale amount and the outstanding mortgage. Or, if the lender is willing, you may be able to do a short sale to satisfy the outstanding balance.

In our next post in this series, we will look at another option for moving forward with a divorce when a house is underwater. Refinancing allows one of the parties to stay in the house and mitigates the risk of financial liability to the other if the house payments are not made.

Source: Nasdaq, "How to divorce your mortgage," Marci Geffner, Jan. 26, 2012