Release of Former Spouse From Liability on a Joint Vehicle After Divorce

By Heather Frances J.D.

If the court awards you the family car in the divorce settlement, it may give you the car loan, too. If you and your spouse are both on the loan, the court may require you to remove your spouse's liability for repayment of the loan. This usually involves working with your bank to refinance the loan or pay it off.

Paying Off the Loan

Most state courts distribute assets and liabilities equitably between spouses, which means the court splits your assets in a fair manner, though not necessarily equally. Courts may consider the amount of money owed on a loan when dividing the property attached to it and balance the value of any remaining assets you receive with the total debt the court assigns to you. Thus, you may receive enough additional assets in your divorce to pay off the remainder of your vehicle’s loan. Paying off the loan releases both you and your spouse from liability on the vehicle loan and once the loan is paid off, it is usually a simple matter of visiting your state’s motor vehicle department to have the title changed to remove your ex-spouse’s name.

Refinancing

If you are unable to pay off your loan or don’t receive enough value in other property to pay it off, you may have the option of refinancing the original vehicle loan. With a refinance, your bank actually pays off the old loan by issuing you a new loan; thereby, eliminating your ex-spouse’s liability on the original loan and replacing it with a loan in your name only. Similarly, you may obtain another loan using other collateral and use the money from that loan to pay off the vehicle loan. You and your ex-spouse may wish to formalize the necessary title changes at the same time as the loan change. This way, your ex-spouse’s name is removed from the vehicle title at the same time he is removed from the loan.

Divorce is never easy, but we can help. Learn More

Hold Harmless Clauses

Your divorce decree or marital settlement agreement may contain a provision requiring you to hold your ex-spouse harmless on your joint vehicle debt. Such a “hold harmless” agreement means you are obligated to pay all joint debts assigned to you in the divorce and your ex-spouse can sue you if he is injured by your failure to pay those debts as ordered. For example, if you don't remove your ex-spouse from the loan and he has to make a payment on the loan because you failed to do so, you may have to reimburse him for the payment he made.

Creditors

Your creditors are not bound by the terms of a hold harmless clause, marital settlement agreement or divorce decree. Instead, your relationship with your creditors is governed by your loan documents. Thus, if you do not refinance or pay off your loan, your ex-spouse may remain legally liable to pay the vehicle’s loan no matter what your divorce documents say. Your failure to make payments on time can even be reported on your ex-spouse’s credit report since his name is still on the loan.

Divorce is never easy, but we can help. Learn More
How to Be Released From a Mortgage in a Divorce

References

Related articles

Does Filing Bankruptcy Remove My Name From Any Property That My Ex-Spouse Still Owns?

After your divorce, your ex-spouse may retain ownership of property that was purchased during the marriage. Unless you are removed as an owner from the deed or car title, you and your ex-spouse will remain co-owners of the property. Although filing for bankruptcy does not remove you from a deed or car title, stopping payments on these debts might create financial liability for your ex-spouse on the property you received as a result of the divorce.

Divorce & Mortgage Indemnity

A home mortgage is usually the most significant debt divorcing spouses share. Sometimes, one spouse cannot afford the payments without the other spouse's financial contribution. In this case, the most sensible thing to do is usually to sell the house and pay the mortgage off. However, if one spouse wants to keep the home, liability for the mortgage may become a big issue.

How to Transfer a Mortgage During a Divorce

As much as you might like to simply sign your name and walk away from your mortgage if your ex gets the house as part of your divorce, it's unlikely the lender will allow you to do so. Mortgages typically aren't transferable, at least not without a lot of red tape. You likely don't have to be locked into the obligation for life, however.

Get Divorced Online

Related articles

What Can I Do if I'm Getting Divorced & Co-Signed on My Ex's Truck?

It’s usually easier to end your marriage than to get out of a joint loan obligation with your spouse. If you co-sign ...

Assuming a Debt in Divorce

Though many couples focus their efforts in a divorce on who gets a greater share of the property, the way your debts ...

Quitclaim Deed & Divorce in Massachusetts

Married couples often own joint real estate that must be transferred if they divorce. In Massachusetts, a judgment of ...

Can I Assume a Mortgage After Divorce?

Two incomes are better than one when it comes to making mortgage payments. Divorcing couples become well aware of this ...

Browse by category
Ready to Begin? GET STARTED