Dividing debt is a standard part of divorce proceedings, and even if a vehicle is in one spouse’s name, the court may order the other spouse to make full or partial payments. If your wife’s name is the only one on the loan, she’s the only one held responsible by the lender, and if payments aren’t made, only her credit will be affected. However, if the court has ordered you to make payments as part of the divorce settlement, you’re legally responsible and can be held in contempt if you don’t pay.
Determining Debt Responsibility
Most states use the common law system for determining property ownership and hold one spouse responsible only if her name is on a deed, registration paper or other document showing ownership. In these states, property purchased before the marriage, including vehicles, remains the responsibility of the spouse who purchased them. In these cases, if your wife bought the vehicle before you married and is solely in her name, you’re protected from responsibility. However, in other states the judge may consider which spouse is in a better financial position, and require her to take responsibility for the debt, regardless of who incurred the debt and whose name it’s in.
Some states follow community property laws, which dictate that all property -- and all debt -- acquired during the marriage belongs to both spouses, regardless of whose name the loan is in. California’s court system rules that community property includes all financial obligations incurred during the marriage, even if the debt is only in one spouse’s name. Even if you’ve agreed how to split up your debts, the arrangement is not legally binding until the judge approves it. Until then, all debts acquired during the marriage belong to both of you, regardless of whose name is on them. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Washington, Wisconsin, Puerto Rico and many tribal communities observe community property laws.
In some divorces, one spouse voluntarily takes on car payments in lieu of other payments such as alimony or child support. If you’re worried about being held responsible for a vehicle in your wife’s name, making the payments yourself can ensure your credit is protected. With a set-off arrangement, you’re spending the same amount of money you would anyway, because the car payments replace support payments. This arrangement is especially helpful if you’re unsure for any reason about your responsibility for the car payments, or if you live in a community property state where spouses are equally responsible for debts incurred during the marriage.
Severing Your Relationship to the Vehicle
When you divorce, cut all ties to the vehicle to ensure you cannot be held responsible. If the car was registered in both your name and your wife’s, have your name removed from the title. Keep in mind, though, that removing your name from the title doesn’t protect you if your name is on the loan as a primary borrower or a co-signer. Contact the insurance company and let them know you should no longer be on the policy for that vehicle. For the most protection, arrange to sell the car, with you and your wife splitting the proceeds.
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