Are you concerned about how your vehicle will be handled in conjunction with your Texas divorce? If you don't know quite how you and your spouse are going to sort out issues related to your vehicle then you have come to the right place. I've noticed (and this may come as a shock to some of you reading this blog) that most Texans drive a car, truck or another motor vehicle. After you've recovered after the surprise of reading that observation of mine, you should know that on top of owning a motor vehicle many people own that vehicle with another person and/or have a significant loan attached to that vehicle.
Additional problems come into play when you owe more on the vehicle than it is worth, at least from the perspective of a lack of peace mind during the divorce. Anyone who has gone through a divorce can tell you that peace of mind can be difficult to come by as it is. Throw in a large car note on top of all the other stressors and you have a combustible situation as far as stress is concerned.
In yesterday’s blog post we discussed a great deal of information on issues related to vehicles, divorce, car notes, car titles and everything in between. We will continue to do so today, but I highly recommend that you go back and read through the information that we wrote about in that blog post. It may contain just a bit of information you need to capture that peace of mind and/or the information that can solve your problem that you couldn't quite figure out.
No lien on your vehicle? Your car-related issue just got a whole lot easier
If you and your spouse both signed on as co-borrowers on a car loan then you both are liable, potentially, if that note becomes delinquent due to lack of payments. In this day and age where car manufacturers and lenders would give a car loan to a house plant, it may even be the case that you all were loaned money to purchase a car that you cannot afford. While this isn’t especially relevant to our discussion today, it does add to the stress levels that you experience as you attempt to sift through issues related to your vehicle.
On a practical level, if you owe money on a car note then you will not be able to transfer title to your name only after your divorce even if the divorce decree allows you to do so. You will need a release of lien form from the creditor to do so. In many cases, the car's title is not with the Department of Motor Vehicles but is rather held with the lender. They will not give you the title or allow you to amend it until the note is paid in full.
However, if you do not have a loan on the vehicle then you can quickly and easily transfer the title on the vehicle from your spouse to you or from both of you to your name only. Simply take your final decree of divorce, the title to the vehicle and a few dollars to your local Department of Motor Vehicles office. There, you can present these documents and have the title updated in whatever manner is appropriate given the orders contained in your Final Decree of Divorce.
Looking out for your credit score, Car loans, and divorce
For some of you, you will find that attempting to refinance a car note can be difficult after a divorce. Your credit score may already below or may have been steadily on the decline due to the inability to make loan payments during an expensive divorce. Or, your credit score may be nonexistent, and your income doesn't help you refinance. Either way, you could find that the instruction in your divorce decree for you to refinance your car note into your name only is easier said than done.
Protecting yourself and your credit score in a divorce is difficult to do. You’ve already seen that you may be put into a position where you are having to rely upon an ex-spouse to pay a debt that he or she may be unable to pay in the future. When that person misses payments it is both of your credit scores that are getting dinged. This can affect your ability to take out future loans on vehicles, secure financing for your business or even be issued a home mortgage. When your future is impacted this much for your vehicle it is a good thing that you are here with us today.
Your divorce decree is the first line of defense between you and your credit score being harmed. The final decree of divorce is a contract between you and your ex-spouse. Both of you are bound to live by the terms contained in that document. If you do not do so then the other spouse may file an enforcement action in the same court. An enforcement lawsuit seeks to do exactly that- enforce the terms of your divorce decree. This can be an effective method to have your spouse live up to their end of the divorce decree.
However, even if you are successful in enforcing the terms of your divorce contract, there is still the matter of dealing with the creditor who can hold you responsible for a debt that is now the responsibility of your spouse- at least under the terms of your divorce decree. However clear you decree that the car debt belongs to your spouse it is still the case that you are responsible under the creditor/debtor agreement. No creditor is going to honor the terms of a state of Texas divorce decree. As far as the lender is concerned, that decree is irrelevant.
A car loan that is held jointly between you and your ex-spouse continues to be a joint loan in the mind of your creditor. This is true even if your spouse violates the divorce decree by the family court judge. An enforcement lawsuit is a great remedy to be made available in Texas, but unfortunately, a creditor doesn't care about it as it is not an effective remedy against them calling you and harming your credit score.
You can talk to your attorney about what you can do to make sure that your divorce decree is clear and concise. These are key factors when it comes to having an enforceable document. The last thing you want is for a judge to go back and look at your divorce decree and determine that you are not entitled to any relief because the document is not clear on what your spouse needs to do to fulfill their end of the contract. This can be avoided by proper drafting.
What about the repossession of the vehicle? Can that come into play?
We have all seen a flatbed truck pull up to a seemingly undamaged vehicle and prepare it to be towed away. Whether it's in the parking lot of a restaurant, in our neighborhood or at an office park, likely, the flatbed is there to take away a repossessed vehicle. This is a method that you can potentially employ when it comes to your spouse's future failure to pay on the debt towards a vehicle that is also in your name. Let's discuss how this may become a reality for you in your divorce case.
Talk to your attorney about whether or not it is an option for you to include some sort of language in the final decree of divorce which states that if your spouse fails to make payments on the car loan for a certain length of time that you can take possession of the vehicle and then trade it in to pay off the loan. How you will take possession and what sort of access you will get to the vehicle is another matter altogether. A deed of trust to secure assumption is a similar document when a spouse does not pay a mortgage on time and you have to go back and foreclose upon them to make good on the house note.
The ability to include this provision in a divorce decree means that you will likely have to negotiate for it in meditation. I have never seen a judge insert this type of language into their decision after a divorce trial. If you are successful in negotiating for this language, your ex-spouse will have further incentive to keep current on the loan payments. Likewise, you will now have a legal method to minimize the harm to your credit score
Pay off debt where and when you can
On the other hand, if you can pay off debt during your marriage this is the best option. Even if you can negotiate a way of handling the debt in your divorce, it still means that you owe somebody else money. Paying off a car loan means that you are better equipped to build wealth and also avoid having to deal with any of these undesirable situations involving your finances.
What to do in the short term regarding your spouse’s car payment?
If your spouse comes up to you one day and announces that he is leaving the house and plans on divorcing you, your first thought likely won’t be, “Do I need to still make her car payment?” However, this is a valid concern moving forward and I will address some issues related to this circumstance in the closing sections of today’s blog post.
If the vehicle is the separate property of your spouse, as in she purchased it or financed it before your marriage, then the answer is pretty safely, no, you do not have to keep making payments. On the other hand, if the vehicle is owned by both you and your spouse then you are both responsible for making payments in the eyes of the lender. As far as a family court is concerned, until responsibility to make payments is shifted by a court to you or your spouse individually, you are both responsible for making payments on it.
It doesn’t matter if the vehicle is titled to only one of you, or if you have never even sat in the vehicle. If the note is in your name, and you have been making the payments on the car, then the odds are good that you are going to have a legal responsibility to make payments on it. This is true at least until a court steps in and says that you do not have to make those payments any longer.
The temporary orders stage of the case is where you and your spouse will divide up the paying of bills for the remaining months of your marriage. The car note is no exception. Don't be surprised to find out that you are responsible for making the car payment even if it is your spouse's separate property. That responsibility will likely last until the end of your divorce to allow your spouse to find suitable employment.
Questions about cars, property or any other issue related to Texas divorces? Contact the Law Office of Bryan Fagan
If you have any additional questions about this subject or any other in Texas family law please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week here in our office. These consultations are a great opportunity to ask questions about your particular situation and to receive direct feedback about your case.
We thank you for joining us today and look forward to you returning to see us here on our blog. Our attorneys and staff are honored to represent clients throughout southeast Texas and we would love to have the opportunity to share with you our thoughts about how we can assist you and your family.