Finances can be one of the most challenging aspects of divorce because of the disagreements that come up regarding a personal loan, mortgage, credit card, or joint auto loan during divorce. How should these balances be distributed between the two former spouses? Each situation is unique, and the specific approach for asset and debt division depends on how the loans are structured.
Deciding who actually keeps the car is also a big factor in determining how to manage a joint auto loan during divorce.
Auto Loans and Community Property
In states with community property laws, it means that everything a spouse owns before marriage belongs to that person when the marriage ends. On the other hand, debt and assets acquired during the marriage are split equally.
For example, if you purchased a car together while married, then the repayment burden is shared equally. Typically, divorce lawyers and the assigned judge will complete a thorough assessment of all assets to ensure a fair division of the assets and the debts. If the debts are higher than the value of the assets, then it is probable that the judge will assign the loan responsibility to the spouse who is better positioned to repay the debt.
Car Loan Before Marriage
Most of the time, the person assigned the car loan will also get the car. With a joint auto loan during divorce, the spouse who doesn’t receive the car gets a fair reimbursement in the form of other assets of equal monetary value.
One other consideration for a joint auto loan is how the loan was paid during the marriage. There might be a right to reimbursement if funds were coming from only one spouse for the monthly loan payments.
Professional Support: Managing a Joint Auto Loan
One other detail you need to consider about a joint auto loan during divorce is the names on the account when the assets are divided. Your ex-spouse might get the car and take over the loan payments, but your credit can still be affected if your name remains on the car loan. The best solution is for the spouse who gets the car to refinance the auto loan, minimizing the financial impact on the other person if payments are missed.
While it can be a challenge to work through the financial details of a divorce, it’s smart to be proactive so you can protect your credit. Take a thorough assessment of all the financial accounts that need to be handled, including the mortgage and a joint auto loan during divorce.