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Divorce & Family Law This forum is for discussing any of the legal issues involved in your divorce.

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Old 08-15-2015, 04:19 PM
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Default Divorce and loan on car

I have a question, and this is really for my friend. She is physically separated from her husband as of one month ago. They have not went through any court proceedings etc yet.

There is one vehicle that has payments. However, it is under her name (ex-hubby has really bad credit). He wants the vehicle, and they had thought of transferring it under his name. However, he looked into it and the interest rate would be crazy high because of his bad credit.

So what she proposed is that since they owe 20K on the car that they purchased together, she would pay him 10K and sign a notarized document saying that she has given him the money, and if he ever defaults, he is responsible for the debt on the vehicle and she is no longer required to make any payments.

When she told me this, I was like that doesn't make any sense. He could technically sign the document, take the 10K, and default on the loan and she would be held responsible as the loan is under her name.

Having a notarized document will not help her if he defaults right? The bank would come after her, and it's up to her in a separate legal battle to come after him for money correct?

This is bad advice from her parents right?
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Old 08-15-2015, 05:01 PM
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Quote:
Originally Posted by FirstTimer View Post
I have a question, and this is really for my friend. She is physically separated from her husband as of one month ago. They have not went through any court proceedings etc yet.

There is one vehicle that has payments. However, it is under her name (ex-hubby has really bad credit). He wants the vehicle, and they had thought of transferring it under his name. However, he looked into it and the interest rate would be crazy high because of his bad credit.

So what she proposed is that since they owe 20K on the car that they purchased together, she would pay him 10K and sign a notarized document saying that she has given him the money, and if he ever defaults, he is responsible for the debt on the vehicle and she is no longer required to make any payments.

When she told me this, I was like that doesn't make any sense. He could technically sign the document, take the 10K, and default on the loan and she would be held responsible as the loan is under her name.

Having a notarized document will not help her if he defaults right? The bank would come after her, and it's up to her in a separate legal battle to come after him for money correct?

This is bad advice from her parents right?
It sounds like bad advice. The parties to the loan are her and the lender, not the husband and the lender. If he defaults, the lender will come after whoever's name is on the loan. The notarized letter represents an agreement between him and her, the lender hasn't agreed to transfer the loan to him. As far as they're concerned, she owes the money.

If he wants the vehicle, he'll have to pay her half the value of the car (what the car is worth minus what's left owing on it). He is responsible for coming up with the financing to buy out her share of the car. She can use this money to pay down her debt on the car.

I don't know how transfer of registration for the vehicle would be affected by this - anyone else know?
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Old 08-15-2015, 07:24 PM
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If he can't afford to take over a $20k loan, he can't afford to maintain both a car and a car loan in her name.

She needs to financially separate herself from him asap. It is her car, she needs to take control of it and park it somewhere until the separation is finalized. She should also be notifying her insurance company asap that the ex is to be removed from all of her policies (provide written notice the ex of the insurance, AFTER she has possession of the vehicle).

His indemnity is only worth what he is - and, apparently, no one else will accept his credit rating, why would she? She will remain liable for the loan that she signed until it is paid out in full.
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Old 08-15-2015, 09:50 PM
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Something else for your friend to consider is her having to re-qualify for existing financing of the vehicle. Her STBX may have lousy credit but his income might have been considered at time of financing. Dealership financing or bank financing? Is the vehicle the collateral for the loan or was the loan a line of credit/2nd mortgage? Often when one person buys the other person out, the financial institution insists on a new loan (they can charge fees, insist on appraisals, and take another look at the creditworthiness of the borrower).
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