The Impact of a Car Loan on Your New Jersey Divorce

Considering the Responsibilities and Pathways to Resolve Joint Vehicle Loans in NJ Divorce Cases

There are a seemingly endless array of marital assets to consider when it comes to divorce. Both assets and debts that have been obtained during the course of marriage are subject to fair division in a divorce, as part of New Jersey’s equitable distribution laws. Often, high value marital assets such as the family home, real estate investments, and automobiles involve contracts bearing both spouses’ names; and both parties remain bound to those contracts’ terms whether or not the two are married. Such is the case for automobile financing. The divorce attorneys at The Montanari Law Group are primed to help you navigate the complicated in’s and out’s of equitable distribution as it relates to jointly held assets and debts in a Passaic County, Essex County, and Bergen County divorce. Myriad joint assets and debts make the process of coming to a fair and amicable marriage settlement agreement an exhausting, trying, and potentially costly process. An experienced divorce attorney at our law firm will ensure that all applicable elements of outstanding civil contracts are addressed in clear terms in the marriage settlement agreement, so you don’t have to worry about your credit or loan eligibility being affected in the future. Contact us at (973) 233-4396 today for a free initial consultation.

Your NJ Divorce Doesn’t Erase Your Car Loan Agreement

A joint car loan is a binding civil contract you and your spouse enter into with a financing entity. It does not take your marital status into consideration; for all intents and purposes, you are simply partners in the contract. As such, when your marital status changes, this civil contract – and your responsibility to your lender – goes untouched. It is, thus, important for the marital settlement agreement to include clear provisions regarding how the joint car loan will be handled. In this way, each individual can be held legally responsible for upholding the terms of the court-approved settlement.

Importance of Determining who is Responsible for a Car Loan after Divorce in NJ

As noted, the terms of a joint car loan remain unaffected in a divorce. A plan for fulfilling the loan payments or changing its structure must be addressed in a marital settlement agreement so that both spouses are clear about their responsibilities to the lender moving forward. Full payment of the loan according to its current structure will stand unless one or both partners approaches the lender to apply for an augmented one. This means that if one person stops paying, the credit of both individuals will be impacted, even if that person no longer has access to the car. A marital settlement agreement must address how the couple will approach the outstanding loan agreement, outlining any changes in responsibility agreed upon by the couples to the back-end payment structure or a plan for amending the loan itself with the lender.

Deciding which Approach to a Car Loan is Right for Your Divorce

There are multiple options for reworking a loan. The spouse taking over car ownership could refinance the loan in their name. To do so, however, that individual must go through the application process and qualify for the loan. Another option for couples sharing an automobile loan is to sell the car, pay off the remaining loan balance, and split the remainder. This, of course, means that the car would no longer be immediately available for either divorcing spouse’s work and family travel needs.

Decoding Car Titles for Ownership vs. Loan Responsibility

A car loan and car title are not the same thing. A car title states who the owner of the car is, while the car loan is a contract outlining payment responsibility and structure. One spouse may receive the car in a divorce and amend the title to reflect their sole ownership. Having one’s ownership rights removed from the car title does not remove their responsibility for fulfilling their share of the loan agreement, however. This can get couples in trouble if they do not specifically lay out how their shared contractual duties to the lender will be addressed after divorce, which are not resolved by simply taking one’s name off of the title.

Speak with a Divorce Attorney Prepared to Help Deal with Car Loan Concerns in Your Divorce in Passaic County, NJ

If your marital settlement agreement absolves you from loan payment responsibility through a plan for amended loan agreement; or if you are listed still on the loan agreement, but your ex is not paying and it’s impacting your credit; you need to reach out to a divorce attorney as soon as possible. A divorce agreement that outlines equitable division of marital assets and debts, such as a car loan, is a legally-binding document (though, as already noted, it doesn’t directly impact a car loan agreement, which is also legally binding). Car loans are one issue that we at The Montanari Law Group are ready to help you resolve during the divorce process.

An experienced divorce attorney on our team will both help you craft an agreement with detailed car loan provisions upfront, as well as help you address breaches to the binding divorce agreement. If you’re in Pompton Lakes, Montvale, Ridgewood, Passaic, Montclair, Wyckoff, Millburn, Elmwood Park, Wayne, Passaic County, or the greater Northern New Jersey area and would like to talk to a divorce lawyer, contact The Montanari Law Group at (973) 233-4396 today to get started and protect your future credit.