Car loan and divorce

A divorce decree is a contract between you and your spouse, but it may not protect you against your creditors. For example, if you have a joint car loan with your spouse, even if the court orders your spouse to pay the loan, if they fail to pay, the creditor may expect you to fulfill your debt obligations if your name is on the car loan.

Recently on our forum a debtor asked, “If I have own a car with my spouse but the court is going to require my spouse to make payments am I protected?” Unfortunately, if you and your spouse continue to own property together after the divorce and your name is on the loan you should take immediate actions to protect yourself in case your spouse defaults on the loan.

Protecting yourself during the divorce if you have a car loan

The first step to protecting yourself can generally be done through the divorce decree. Although you need to consult a lawyer, some jurisdictions may allow you to include specific remedies about vehicle repossessions within the divorce decree.

For example, some divorce decrees will allow you to include a paragraph stating that if your spouse fails to make payments in a timely manner on a car loan you have the legal right to take the car and trade it in to repay the car loan. This provision may help incentivize your spouse to meet the loan agreements and give you protection if they fail to meet their debt obligations.

Another provision which may be available is the “hold harmless” provision. If this provision is included in your divorce decree it can specify that your spouse is taking full responsibility for the loan and if the spouse fails to make payments for the car loan you will not be liable for the debt owed. The provision can also work if your name is on the car loan and the creditor harasses you for repayment because your spouse has defaulted on payments.

Is my spouse in contempt of court?

Finally, if provisions in the divorce decree have not been followed it may be possible to ask the court to hold your ex in contempt of court. If the court agrees they can issue monetary sanctions against your spouse and grant you relief. If the court grants relief and imposes monetary sanctions against your spouse you may have the right to have your ex-spouse’s wages garnished or have a lien placed on their property. Remedies will vary by state and jurisdiction, but in most cases, they are similar to what the creditor could pursue.

The good news is if your ex-spouse fails to meet their contractual obligations you have legal remedies you can pursue. The best solution, however, is to resolve debt issues prior to divorce, including repaying debts, refinancing car loans, and selling joint property. When this is not possible, however, it is important to discuss your case with a lawyer and make sure your financial interests are protected.