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CARS and DIVORCE - Don’t Mix at least not cars with loans…

If you and your spouse, soon to be X, or X own a car or boat or RV or other titled vehicle  together you need to sell it or pay it off before the divorce decree is signed to be sure that you have an equitable division in the divorce.

The typical scenario is that both parties have a car, both cars are in both names, or at least the LOANS for these cars are in both peoples names.  

You or the Judge decides who will keep each car and who will pay each car off.

Then life happens and usually your X will turn into a totally irresponsible piece of crap and quit paying on their car. 

You start to get collection phone calls, they start to get collection phone calls. 

The Lender says to you that you can pay the back payments and penalties or pay it off  to avoid the credit damage and/or a repossession on your Credit.

You tell them that you have a Divorce Decree that says you are not responsible for this automobile or its payments, and…

They basically say, “We don’t care!” 

And the law is on their side. 

The Loan Contract you sign (that hardly anyone reads or understands) when you buy a car usually says you are jointly and severally (together and each individually) responsible for the repayment of the loan. 

The Judge in Divorce Court cannot undo this for you.  So there is no point in asking.  A good one should point the risk out and usually advises or even orders both parties to pay the loans off or refinance as soon as possible. 

DON’T TRUST THIS!  My Girlfriend had this very scenario.  The Judge had ordered him to refinance within a year.  He didn’t.  He quit paying.  She took him back to court to force him to pay or refinance and the Judge basically said (based on his bottom line tax return number), that he didn’t have the ability to repay, so he didn’t have to do anything.  He could keep driving the car until the repossessed it.

But the facts are that the average Joe or Jane in a divorce ends up with screwed up credit and they can’t refinance, at least not on good terms, so they don’t and if they are a real jerk or bitch, then they quit paying and here you are facing all the debt and credit implications that weren’t supposed to be yours in the divorce.

You cannot go take the car unless your name is on the title and the divorce papers don’t spell out that it is the other parties car. 

So be careful, whether you are divorcing in a friendly manner or in a long drawn out litigious manner, this issue usually comes up and is common, unless all cars are paid off or sold, you may be facing significant debt and credit risk in the future.

The Solution is Easy!

• Pay off the car loans with other accounts, funds or proceeds from sale of other assets.
• Sell the cars and payoff the debt.

Do this before the Divorce Decree is signed!

BTW:  Ford Motor Credit seemed to handle this matter very poorly in my Girlfriends case she even offered a reduced payoff amount and terms where she repaid it and they refused.  Instead Ford sought a judgment for about $26,000.  She wrote a long detailed letter, explaining the circumstances to the judge, included copies of the divorce decree, the orders for her X to pay it and documentation of her previous failed attempt at taking him back to court, as well as mention of her significant assistance to Ford Motor Credit in their collection efforts (keeping track of the X’s cellphones, addresses, wives, etc…).  As far as we can tell she has been dismissed completely from this judgement.  We were both amazed.  Three different attorneys told her it wasn’t worth litigating that she might as well pay it (she couldn’t) or file bankruptcy.  So if you are already in this situation and you get this scary letter about a judgment, at least do a little Internet research on how to respond and send your response into the courts or appear in court if you get the chance to defend yourself…  Otherwise the Creditor will get a default judgment (whatever they ask for) and they will be able to being garnishing wages, attach other assets, etc.

Good luck!