Removing your ex-spouse from the car loan
When going through a divorce, all assets are usually split between the two parties involved. If you’re awarded the family car in the divorce settlement, you will usually receive the car loan too. If you and your ex-spouse are on the loan, the court might mandate that you remove your ex-spouse’s liability for the repayment of the loan. Let’s look at how you can do this:
Pay off the loan in full – Almost all state courts divide assets and liabilities fairly between two parties. The courts might consider the amount of money owed on a loan and balance the value of any remaining assets you receive with the total debt that the court assigns to you. As a result of this, you may receive enough assets to pay off the remainder of the car loan. Paying off the loan will release both you as well as your spouse from the liability of your car’s loan. After paying off the loan, all you will need to do is visit your state’s motor vehicle department to have your ex-spouse’s name removed from the title.
Refinancing – If you cannot pay off the loan, you can explore the option of refinancing the original vehicle's loan. A refinance works by the bank paying off the old loan on your behalf and issuing a new loan in your name. This eliminates your ex-spouse’s liability by replacing the loan with your name only. Work with your ex-spouse to formalize the title at the time of the loan change.
Hold harmless clauses – A marriage settlement or divorce decree can contain a provision that requires you to hold your ex-spouse harmless on your joint vehicle debt. A 'hold harmless' clause basically means that you are obligated to pay off all the joint debts in the divorce. Your ex-spouse will be able to sue you if he/she is harmed by your failure to pay the debts as ordered.
You can remove your ex-spouse from a car loan in the above-mentioned ways. Explore all of them and opt for one which works the best for you.