This is not marital property as marital funds were not used to acquire it. You may need to account for the marital funds used for taxes, insurance, and maintanence to reimburse the marital estate. These details should not be broadcast over the Internet.
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If you provided any marital contribution to the home which you received through a quitclaim deed from your mother, your wife could have an argument that she is entitled to a portion of the home. However, since the home is under water, what she is really asking for is half of the debt. If you do not have an attorney, you really ought to retain one to handle this and many other issues in your divorce.
GET TO AN ATTORNEY NOW!
The property may be nonmarital, but she could be entitled to a portion of her contribution. But as pointed out, if the house is upside down she is really looking to share the debt.
It sounds as if neither of you have attorneys. You should remedy that lack as soon as possible.
If you found this Answer to be helpful, please mark it as such. Remember, however, this is only generalized commentary on your question. It is not to be taken as legal advice. Even "in person" interviews leave attorneys with plenty of questions – the Internet makes it crazy. Thank you Chuck Watson 217.544.6165
This will become a thorny issue if the two of you do not retain counsel who can draft a proper Marital Settlement Agreement. With real estate prices continuing to plummet, before long, this could be a costly post-judgment litigation over who is liable for debts connected with the property.
The author provides the preceding information as a service to the public. Author's response, as stated above, should not be considered legal advice. An initial attorney-client conference, based upon review of all relevant facts/documents, will be necessary to provide legal advice upon which the client should then rely.
Based upon the facts you outlined the short answer is give her the property and hire an attorney.
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