Managing Your Auto After Divorce
Autos, vehicles such as boats and off-road vehicles, are considered community property or marital property, depending upon which state you are in. In divorce, any marital assets are divided and if you each have your own auto, it should be relatively simple.
There are several steps to determining how to manage your auto (and other vehicles).
Marital or Separate Property
In most instances, if a vehicle was purchased during the marriage it would be considered marital/community property even if it is titled in only one spouse’s name. If it was purchased prior to the date of marriage, then the vehicle usually will be considered separate property of that spouse.
Division of Assets
If you both have vehicles, there may be an equalization payment due to the other spouse if one vehicle’s fair market value is greater than the other’s vehicle. Of course, this depends on whether you are in a community property state (California), in an equitable distribution state (Michigan), in mediation, or litigating your divorce in the court. In community property states, equalization to achieve a 50/50 split of marital assets is common. In equitable distribution states, a judge or both spouses if you’re in mediation, would divide the property in a way that is balanced and fair. There are many possible ways to divide community or marital property depending upon your state’s statutes and the divorce process you have elected.
If the marital settlement agreement awards a vehicle to one spouse, the other must cooperate with signing over the title to that spouse. Repercussions, including your ex being held in contempt of court, sanctions (fines) against your ex for attorney fees, and fines for having to return to court can be pursued.
Auto Loan
If the auto has a joint car loan, both spouses will be still responsible for the debt, even after the divorce is final. If payments are missed, either of you could still be pursued by the lender for payment. Most lenders will not allow for a refinance of the car loan to remove the other spouse from the title.
To protect the credit rating of the spouse who is not awarded the vehicle after divorce, that spouse may include a statement in the marital settlement agreement that if there is a missed payment, he/she may be able to take possession of the car after a certain number of missed payments. Along with this, you may be able to hold your ex-spouse in contempt of court for not honoring the marital settlement agreement.
Auto Title
To transfer the title of the auto to one spouse only, the spouse awarded the vehicle takes the title to the state’s Department of Motor Vehicles or Secretary of State depending on which entity manages licenses and registrations. Along with the title, bring a lien release document, proof of insurance, and your divorce decree. You may need your ex-spouse’s notarized signature on the title if held jointly. Sign the titled before submitting it and you will receive a new title in your name only.
Selling Vehicles During Divorce
In most circumstances, during the divorce process, if you and your spouse agree, you may sell any marital property even before the divorce process is finalized. You will then split the proceeds of sale with your future ex-spouse.
Once a vehicle is titled in your name and you have been awarded it in the divorce division of assets process, you are free to sell the vehicle or use it for whatever purpose is desired. However, if it is financed with an auto loan, there may restrictions. Check with your lender to determine what options might be available since your ex-spouse may still be on the loan if the lender has not agreed to refinance the loan.
