Yes, as long as everyone with a claim to the note agrees or a court orders it. A note that is marital property generally cannot be sold by one spouse alone while the divorce is open. With both signatures, a sale turns years of future payments into cash that can be divided on a single day.
Who has to agree
Start with the name on the note. If both spouses are named as holders, a buyer will need both to sign the assignment, the document that transfers the note. That is the rule for anyone selling a note held with a co-owner, married or not.
If only one of you is named, that person may still not be free to sell. A note created during the marriage may be treated as shared property under your state’s rules, whatever the paperwork says, and a court may issue orders at the start of a divorce that stop either spouse selling assets without consent. Expect a buyer to ask about the divorce and to want the other spouse’s written consent or a court order before funding.
How property is classified and divided varies by state. Your divorce attorney is the person to confirm who must sign.
How couples deal with a note
| Option | How it works | What to watch |
|---|---|---|
| One spouse keeps it | That spouse takes the note and gives up something of equal value elsewhere in the settlement. | The value used for the note. The balance owed overstates it. |
| Sell it and split the cash | The note is sold, and the proceeds are divided as agreed. | You accept a discount in return for a clean break. |
| Sell part of it | A set number of payments is sold for a lump sum, and the rest of the note comes back later. | Someone still owns the later payments, so the tie is not fully cut. |
Holding the note jointly after the divorce is possible too, though it keeps two former spouses tied to one borrower for as long as the note runs.
Use the right number for the note’s value
A settlement that lists the note at its unpaid balance has overstated it. The balance is the amount the borrower owes. A buyer pays less than that in order to earn a return, and the buyer’s figure is what the note would actually fetch.
Suppose, as an example with round figures, the borrower still owes $90,000 and the best written quote for the note is $81,000. If one spouse takes the note at $90,000 and the other takes $90,000 in cash, the spouse holding the note has something that would sell for $9,000 less, 10% of the balance, and also carries the risk that the borrower stops paying.
Example figures chosen to show the arithmetic. They are not a price for any real note.
A written quote from the market gives both sides a figure that neither of them produced. You do not have to sell to get one.
Before the decree or after it
Selling before the divorce is final means the cash is on the table when the settlement is drawn up. Both spouses sign, and the money can go to an attorney’s trust account or be divided at closing as you instruct.
Selling afterwards is simpler on paper if the decree awards the note to one person, because that person then signs alone. A buyer will ask for a copy of the decree and may want the assignment between spouses recorded first, two of the paperwork points in our longer guide to selling a note in a divorce.
The tax treatment of a sale and of a transfer between spouses can differ, so ask a CPA before you choose the order.
When a partial fits
A partial sale, where you sell only some of the payments, can fund a buyout without giving up the whole note. If one spouse wants to keep the income and owes the other a fixed sum, selling just enough payments to raise that sum leaves the rest of the note intact. It needs a note with enough payments left and a payer with a steady record, so a note near its end or one with missed months may draw full-sale bids only.
A figure both attorneys can use
Ask your attorney who must sign, and whether the court needs to approve a sale. Then send us the note details for a written figure to put in the settlement papers. Unlike the other occasions in when selling a note makes sense, this one has two people who must accept the number, which is the reason to take it from the market and not from either spouse.
Related questions
Can my spouse sell our note without telling me?
A careful buyer will not fund without the signature of everyone named on the note, and will ask about any pending divorce. If only your spouse is named, tell your attorney about the note early so it is listed with the other assets.
Is the note worth its unpaid balance in a settlement?
No. The balance is what the borrower owes. The market value is what a buyer would pay today, which is lower because the buyer needs a return. A written quote gives you the market figure.
Do we have to sell the note to divide it?
No. One spouse can keep it and trade other assets, or you can sell a set number of payments and keep the rest. Selling is simply the cleanest way to end the shared tie to the borrower.