Recently, a colleague approached me with a question about a friend’s matrimonial home that was going Power of Sale by the lender. We’ll call the friend Jane (not her real name).

Ten years ago, Jane moved to Canada, met a fellow and got married. Things did not last, and after being estranged for a length of time, she moved out of the matrimonial home. Now in her late 20s, they have a 6-year old child together, have been separated for three years and are not communicating. There is no Separation Agreement in place.

Jane was recently served with papers from their bank threatening to put the house on the market under Power of Sale because the mortgage payments are in arrears. A lawyer advised her to sell the house. In order to save the asset, she reached out to see if I could list the home for sale.

In my research, I discover that both the home and mortgage are registered to the husband and his mother only. Jane is not on title. Unfortunately, I must inform her that I cannot list the home for her as it would be deemed an illegal listing. I would need the permission and signatures of both the husband and mother as they are on the title and mortgage.

To me, this situation begged the question - knowing that the local real estate market has soared over the last few years, there was bound to be a ton of equity in the home worth fighting for.  Why then would the husband and mother waste that equity and allow it to go Power of Sale?

I asked a series of questions to find out more information, and my colleague and I ran through a few scenarios. I felt it came down to one conclusion. What if there wasn’t any equity left in the home to waste?

My assumptions proved correct. Husband and mother had spent the equity in the home through various loans (liens on the property). There wasn’t anything left. This is called “Wasting the Asset”.

What does this mean? Wasting the asset is a phrase that essentially means the value of an asset is dissipated or reduced in value, either directly or indirectly, through the actions of the owner. Sometimes this is done intentionally in order to prevent the other spouse from getting their fair share of the proceeds.

While I don’t know the intent of the parties in this case, it highlights the importance of staying on top of the financials in a separation or divorce and watching for signs of potential issues, such as unusual spending patterns, luxury purchases or frequent travel.

In my own personal life, I discovered that my ex-husband, who had always paid the mortgage throughout our 17-year marriage, stopped payments when we separated. When the home sold, I found out that I didn’t qualify for a mortgage because my credit score had been destroyed by these missed payments. I had to work hard to improve my credit and have been obsessed with maintaining a perfect credit score ever since.

Like my experience, Jane’s situation is another great example of how important it is to not only understand your financial situation when you separate but, where possible, to separate your finances from your ex-spouse as soon as you can. Get your own bank account and your own credit cards. Your credit score is critical for you to move forward with your life, so protecting it is paramount.

As their trusted professional, I coach and encourage my separated couples to work together to keep their credit intact. That may include a tough conversation about who is going to make the mortgage payments while they separate and figure out the next steps. It’s not enough to assume that one party will take responsibility for it without a conversation.

So, what happened with Jane? In an effort to protect her credit, Jane approached her bank to discuss being absolved of any responsibility for the missed mortgage payments. She knew that her credit score was her passport to any future financial opportunities and in the end, the bank granted her a pardon.