When a marriage ends, the parties divide their assets and go their separate ways. However, what happens to liabilities like a car loan?
In a perfect world, both parties are responsible for the debts they incurred and then part ways. Unfortunately, this is not the case. Consequently, take care of your debts after a divorce.
The Legal Obligation of an Automobile Loan
Do not assume that your ex-spouse will make regular auto loan payments merely because the divorce decree holds him or her responsible for the loan. It is conceivable that he or she will not make payments.
Remember that the divorce agreement is distinct from your loan agreement. The divorce agreement is not significant to lenders. In the eyes of the court, your ex-spouse may be liable for the loan. However, if you applied for a joint auto loan, lenders will hold you equally liable.
How to Handle an Auto Loan Following Divorce?
It is essential to remember that although your marriage is over, a loan will continue to affect your present and future. Here are some strategies for managing your auto loan and preventing your credit score from plummeting.
1. Eliminate the Loan
The best way to handle an auto loan after a divorce is to get rid of it. If your former spouse is responsible for making payments, only his or her name should appear on the loan.
However, keep in mind that no lender will remove your name from the loan contract because your marital status has changed. Therefore, your ex-spouse must refinance the loan and complete the loan process independently.
2. Eliminate the Vehicle
If you are concerned about refinancing, you can sell the vehicle and repay the lender. It is possible that an upside-down loan situation will require you to pay money to the lender, but it is essential to realize that a loss today is preferable to perpetual stress.
Ensure that the Lender is paid
If your ex-spouse is responsible for the loan and you both decide not to sell the car, you will need to ensure that he or she makes regular payments.
If your ex-spouse is not making payments, you should contact your attorney. It is possible that you will need to make a few payments in order to prevent a negative impact on your credit score. Set aside a portion of your income for this purpose.
Managing your automobile loan may be the last thing on your mind. However, it is essential to realize that your marriage has ended, not your auto loan. Your credit score may be irreparably damaged if you fail to effectively manage it."""