Divorcing couples have plenty of important issues to resolve, including child support, custody issues, and division of property and perhaps a jointly owned home. Settling who owes what on a car loan and what to do with the car might not seem like a big deal, given the other items on the list, but it can have enduring consequences. This article answers some frequently asked questions about handling a car loan when you divorce in Massachusetts
What options do we have for handling our car loan?
The best course of action is to try to sell the vehicle. If possible, make sure that the vehicle is sold before the divorce is finalized. If you just have an agreement to sell but haven’t gone through with it yet, you are still responsible for the payments and your credit is in jeopardy. If the vehicle still has payments due, then it is better to sell the car at a loss than risk ruining your credit. Unfortunately, selling the vehicle is not always a feasible option in a divorce case, especially if you have kids or either of you depends on the car to get to work.
The second best option is to have one spouse refinance the car in his or her own name. If one spouse will keep the car after the divorce, then you should insist that your soon-to-be-ex obtain new financing in his or her own name before the divorce. If he or she is not able to qualify for separate financing, maybe a relative can co-sign the loan.
Don’t just take your name off the title, as this will remove only your ownership rights, not your responsibility for the loan. Put a time limit on how long your ex-spouse can have possession of the car before it has to be sold or refinanced. Also, notify the car finance company of your change of address and have all statements sent to both addresses. At the very least, inform them that you wish to be notified if any payments are missed. In this way, if your former spouse is late on payments, you will be notified and have the chance to make up the payments.
If refinancing is not an option, then the most practical solution is often to use a setoff arrangement against support or alimony to insure that the car loan is paid off. This can also protect your credit rating. If a divorced husband has to pay alimony and or child support, for example, he can try to work out an arrangement in which he pays the car loan directly, subtracting that amount from his support payments.
Should you be in the midst of a divorce proceeding or contemplating divorce, contact the Law Offices of Renee Lazar either by email or telephone 978-844-4095 to schedule a free one hour consultation to discuss your particular needs.