Can My Spouse Take out a Loan Using Our House as Collateral After I File for a Divorce?

This is a good question and one that often comes up in divorce cases.

I cannot speak for the law in all jurisdictions, but as this question applies in the jurisdiction where I practice law (Utah), these are my observations (my discussion of a general question on Quora does not constitute legal advice, so anyone who has this particular question needs to consult with an attorney personally):

In Utah, can a spouse take out a loan using the marital home as collateral after the other spouse files for a divorce?

First, we need to know what “marital home” means in this context. Even if the house is in your spouse’s name alone, if the house was purchased by one spouse during the marriage, it is (unless the spouses contracted otherwise) still considered marital property because it was purchased by your spouse while he/she was married to you.

So, is it possible for your spouse to borrow against the marital home after a divorce action has been filed in Utah? Yes, but not likely, and even if the loan/credit was made, a Utah court would almost surely void the loan/credit contract.

Yes, if by “possible” we mean that your spouse was able to find a lender who is willing to contract with your spouse to borrow against the marital home’s value without your consent. This does not mean that the loan/credit contract is necessarily enforceable. This does not mean that the loan/credit contract could not be set aside by the divorce court as a fraudulent conveyance under the right circumstances (see below).

Not likely because 1) I don’t know of an institutional lender who would agree to accept as collateral all or a portion of a marital home without obtaining the consent of both spouses first; 2) such unilateral action on the part of your spouse to encumber marital property without your consent could be set aside as a fraudulent conveyance (See Bradford v. Bradford, 993 P.2d 887, 1999 UT App 37 (Court of Appeals of Utah 1999)); and 3) Utah Rules of Civil Procedure 109 provides, in pertinent part:

Rule 109. Injunction in certain domestic relations cases. Effective: 1/1/0021

(a) Actions in which a domestic injunction enters. Unless the court orders otherwise, in an action for divorce, annulment, temporary separation, custody, parent time, support, or paternity, the court will enter an injunction when the initial petition is filed. Only the injunction’s applicable provisions will govern the parties to the action.

(b) General provisions.

(1) If the action concerns the division of property then neither party may transfer, encumber, conceal, or dispose of any property of either party without the written consent of the other party or an order of the court, except in the usual course of business or to provide for the necessities of life.

And so, if your spouse attempted, after a divorce action was filed, to encumber marital property without your written consent, the court would likely void the transaction as fraudulent and/or penalize your spouse for violating the Rule 109(b) prohibition against a spouse encumbering marital property without his/her spouse’s written consent.

Utah Family Law, LC | | 801-466-9277

(61) Can my spouse take out a loan using our house as collateral after I file for a divorce? – Mother-in-Law Mysteries and Conflicts – Quora

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