How Does Your State Handle Property Division?
In addressing property division in a divorce, the first question will be whether your state follows a community property or equitable distribution approach to dividing assets and debts.
Most states utilize the equitable distribution process, which means a court will divide property in a way it believes is fair in any given case, regardless of whose name is on the title. A few other states employ a community property theory, where courts must divide property obtained during the marriage on a straight 50/50 basis.
Both equitable distribution and community property states provide certain exceptions to the basic rule that all property is divided between the spouses. Courts in all states will generally not divide separate property in a divorce. Although the rules may vary slightly from state to state, separate property usually includes any premarital property that either spouse owned and any property that was received by way of a gift or inheritance at any point.
Whatever system your state uses, automobiles fall squarely into the zone of property subject to distribution. Unless your car qualifies as one of the separate property exceptions referenced above, who ends up with the vehicle is an open question.
To learn more about “equitable distribution”, see this article. For information on “community property”, look here.
How Does a Court Decide Distribution of an Automobile?
In answering that question, you have to think both short-term and long-term. Short-term refers to the period while the divorce is in progress. Long-term would be after the divorce is done.
Possession of a Car During the Divorce
Divorce laws in many states prevent spouses from taking certain actions as soon as the divorce starts. These provisions of the law are often referred to as Automatic Temporary Restraining Orders (ATRO). Their purpose is to ensure that a spouse doesn’t do anything that could jeopardize the safety or financial well-being of the other spouse or family members. Cancelling insurance policies or depleting bank accounts are typical activities prohibited by these orders. Disposing of an automobile or any personal property generally falls within the boundaries of these orders as well.
If your state doesn’t provide for ATRO’s, and if your spouse has somehow compromised your ability to use a car you normally have access to, your lawyer can apply to the court for immediate relief, either through a “motion” (written request for the court to take certain action) or by way of an “order to show cause” (a faster way to get into court). Once a judge makes a decision on the issue, it will typically remain in effect until the final judgment of divorce.
Deciding Who Gets the Car at the End of the Divorce
Considering that the vast majority of divorces settle before a trial, it’s likely that you and your spouse will reach a settlement agreement on dividing your assets. But if you don’t, then a judge will have to make the final determination.
If you’ve had relatively exclusive use of a particular car during the marriage, a judge will probably allow you to keep it after the divorce. This is especially true if your spouse has access to a separate vehicle. If your spouse doesn’t, however, then you’ll have to prove to the court why the fairest outcome would be for you to keep the car. For example, you need it to transport the kids to and from school. However, even if you keep the automobile in this scenario, you’ll probably have to compensate your spouse for a portion of its value.
If you and your spouse each has a vehicle, a problem may arise if there’s a significant disparity in what they are worth. In a community property state, the judge will need to equalize the amounts due to each spouse. If the court in an equitable distribution state believes that the owner of the cheaper car should receive some compensation, the judge will need to decide how much is fair, under the circumstances. In both these instances, a court will usually order the spouse with the more expensive vehicle to directly pay the other spouse the amount determined to be due. In the alternative, the disparity can be made up when dividing other assets, such as bank accounts.
Distribution of a Car in Divorce Can Affect Title, Insurance, and Loans
It’s important to remember to change the title and insurance on a vehicle when transferring ownership in a divorce. The judgment of divorce is normally sufficient for a state’s motor vehicle commission to transfer the title and issue a new registration. You should also notify the insurance company of the change, so it can issue new insurance cards.
If you’re transferring ownership to your spouse, and there’s an outstanding auto loan for which you’re responsible, the divorce judgment should state that the loan will be refinanced so it’s only in your spouse’s name. It should also require your spouse to provide proof that this has been done. Be sure to check with the lending company in advance about the mechanics of releasing you from the loan.
If the lending company won’t allow a refinance, then you could ask the court to order that the car be sold. If you'd rather not do that, or if the court denies the request, then the divorce judgment should at least provide that your spouse is solely responsible for the loan payments. This may not be binding on the lender, but it spells out your spouse’s obligation, in case there’s a default on the payments and you need to go back to court to enforce the judgment. You should also see to it that the lender provides you with written notice of any payment delinquency.
If you have any questions about how property is divided in divorce, consult with a reputable and knowledgeable divorce lawyer.