During divorce negotiations, spouses have to separate their finances. They may each open a separate banking account to keep their wages separate. They may freeze revolving lines of credit that they can both access. They have to split up their personal property and shared resources, as well as their marital debts.
Frequently, high-value resources can complicate property division negotiations. Particularly in cases where valuable assets are also the collateral property for substantial marital debts, spouses may find themselves struggling to find viable solutions for key financial issues.
If spouses financed a vehicle purchase during their marriage, who keeps the vehicle, and who pays the loan?
Financed vehicles require careful consideration
Purchasing vehicles with a loan is common. Car loans may require three, five or even more years of monthly payments before drivers own their vehicles outright. If divorce occurs while there is still a balance due on the loan, the vehicle represents both debt and equity.
Sometimes, spouses can make arrangements where each assumes responsibility for the vehicle that they currently drive. Other times, one spouse may lack the income or credit score necessary to carry a vehicle loan without a spouse as a cosigner.
Occasionally, spousal support or child support payments could help one spouse assume responsibility for a car loan after a divorce. Various details, including child custody arrangements, other debts and employment may influence decisions related to motor vehicles and the loans used to finance their purchase.
Determining how much vehicle equity spouses have accumulated and how much debt is still due on a car loan could help spouses negotiate reasonable property division settlements. Identifying priority resources and creating a realistic budget are both important when people who have financed vehicles decide to divorce.
