House underwater in divorce how to handle it?

Having a house underwater will not prevent you from going forward with the divorce. The division of the debt that is associated with the marital home will be included in the divorce proceedings. The court is going to look at all assets and debts acquired during the marriage with a few exceptions and it will look at the marital home. The presumption is to split marital assets and debt fifty/fifty between the parties.  If the house is underwater, you will both still be liable for the debt to the lender; regardless of what is decided in your agreement or final judgment.  You may find that bankruptcy is an option for both of you to discharge the debt associated with the marital home.  This can be done prior to or after the divorce if you both intend to file it.