Establishing financial separation is one of the most challenging aspects of any divorce. Spouses have to work out arrangements for splitting up their property after years of sharing everything. They also need to address responsibility for their shared debts.
In cases where spouses have secured loans and high-value items are the collateral for the financial obligation, it may be necessary to address not just the asset and the equity accrued in that asset but also the debt attached to it. It is common for people to finance vehicle purchases.
Car loans may still have a substantial amount due when one spouse files for divorce. What happens to a financed vehicle when people decide to divorce?
Refinancing is common during a divorce
Frequently, both spouses share responsibility for debts that originate during the marriage. This is true even for debts that primarily benefit one spouse, such as a vehicle loan attached to their personal vehicle.
Particularly when each spouse has a financed vehicle purchased during the marriage, each person might retain the vehicle they usually drive and refinance the loan so it becomes their sole responsibility. They can then assume sole ownership of the vehicle.
Occasionally, more complicated solutions may be necessary. If the person who wants to keep the vehicle cannot qualify for a loan without a cosigner or if a spouse lacks sufficient resources to adequately compensate the other spouse for giving up their interest in the vehicle, addressing the vehicle may require careful consideration.
Exploring current financial obligations and resources carefully – with the assistance of a skilled legal team – can help people prepare for property division negotiations or litigation in family court. People who understand how to address specific assets empower themselves to push for the best possible outcome.