The Impact of COVID-19 on Divorce and Bankruptcy

In this podcast, I discuss the financial impact caused by COVID-19 on divorces and bankruptcy. I’ll also focus on the issue of mortgage interest rates increasing post coronavirus, which has resulted in having to sell homes pending divorce. The issue of quit-claim deeds will also be discussed.

Listen to the podcast by clicking above.

The Housing Market Before and After COVID-19

Because of COVID-19, interest rates on mortgages were reduced, causing a surge in real estate prices and a buying frenzy. To combat inflation, the Federal Reserve increased interest rates, making it more difficult for some homeowners to afford their mortgages, especially those who bought at the market’s peak. Now the issue is selling those homes.

Challenges of Divorce During High-Interest Rates

Divorcing couples may struggle to sell their house due to the increased home value and higher interest rates. If they cannot sell the house, this could affect their ability to qualify for future loans and mortgages. There has even been an increase lately in underwater mortgages, which means more is owed on the mortgage than the value of the home.

Understanding Domestic Support Obligations in Bankruptcy

One important issue discussed in my podcast is that of quit-claim deeds. Often, homeowners don’t know that a quit claim deed only transfers ownership of the property, not the mortgage obligation. So, both parties are still liable for the mortgage.

Recommendations to Consider When Divorcing (Quit Claim Deeds)

A quit-claim deed generally should be signed on the day of the closing. That way, it is confirmed that the other spouse qualified for the mortgage. It’s common in divorce or marital settlement agreements to list that the other party will sign a quit-claim deed upon signing the agreement. However, the issue is when the other spouse doesn’t qualify for a mortgage, or maybe did initially, and no longer does.

If there is concern that the other spouse won’t comply with the agreement and sign the quit claim deed later on, then it can be signed upon the divorce agreement being filed, and held in trust by the divorce attorney or title company. If, for whatever reason, a refinance on the mortgage isn’t done, then the quit claim deed can be destroyed or returned to the signer.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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• Bankruptcy
• Your Wallet

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon books. Podcast archives can be found via this link.

The information on this site does not constitute legal advice. For legal advice, always meet with a local qualified lawyer.

Updated on September 5, 2025.