If the house presently appraises for $170,000 and has a FMV of $197,000, the difference is $27,000.

If you and your spouse want to sell the property, investing $10K in the home to get it ready for sale would be a reasonable and from what you've told us probably a necessary step - and there are additional costs to sale, including real estate agent commissions and closing costs. If one of you wants to keep the home, it's reasonable to apply FMV - although you're free to negotiate over the issue of "necessary repairs".

Often when one party keeps the marital home, the divorce decree keeps the present mortgage in place and defers the division of the equity in the home until such time as the house is sold or refinanced, the minor children reach adulthood, the spouse who keeps the home remarries, or some other contingency. Usually, that's because one party can't afford to buy the other out at the time of divorce, or because the spouse keeping the house can't afford to refinance and pay out the other spouse's equity. You don't have to agree to such an arrangement, and it wouldn't appear to make sense to do so under the circumstances.

You put yourself at risk in "dividing" credit card debt, because credit card companies aren't bound by your divorce judgment. If your ex- doesn't pay "her share" of the debt and you're on the credit cards, they'll come after you. The same holds true if she declares bankruptcy sometime after the divorce. You will also want to be absolutely sure that no new charges can be made on the joint accounts after the divorce - that any cards she keeps are exclusively in her name, with no option of "reopening" joint charge accounts.

You can't count on being able to short sell the property - your bank may not agree. Further, you can't count on that happening over the short-term. I don't know your lender, but many financial institutions want to see you significantly behind on your payments before they'll consider a short sale (and yes, that damages your credit even if you aren't ultimately approved for the short sale). You could get to that point and discover that your lender prefers to foreclose.

In a contested divorce, in which you'll be putting that $10K into lawyers instead of a new roof and home repairs, the court is likely to try to come up with a 50/50 split of the property. The bank can order the home sold, but cannot order a short sale - if you have the opportunity for a short sale the court can consider that, but the court has no authority to order the bank to write off any portion of your debt. If you go to court in agreement that the home is worth $170,000 and are prepared to refinance the house to remove your spouse from the mortgage, and your spouse does not want the home, I would expect the court to award you the home on those terms. If you want a mortgage that includes your spouse to remain in effect, you may end up with the type of deferred arrangement I previously mentioned, and I suspect that it's going to be extremely difficult at that point to get your wife to contribute if the home remains upside-down, even though she'll be happy to take a share of the equity if the market bounces back.