How To Determine Who Gets The Car In a Texas Divorce

A common issue in a Texas divorce is the division of an automobile when the car debt is in the name of both parties. These can be tricky situations because they involve a third party, a creditor. Below, I discuss possible options to divide a car in this situation, but first, it is important to understand that the divorce court cannot control third parties, in this case, the creditor.
A court only has the power to control the parties in a lawsuit (i.e., the spouses). They cannot order your bank, a mortgage company, or an automobile creditor to do something. The two spouses in their court are the only people they can order to do something. And this makes sense. We do not want courts telling us what to do unless we are somehow involved in a lawsuit.
In a typical scenario, the spouses want to divide their cars in their divorce, but the debts on those cars are in the name of both parties. Neither party wants their name stuck to a piece of property to which they no longer have any rights. What can they do?
The creditor wants to get paid. They are not going to release a spouse from the car debt as that is one less person they can go after if the debt is not paid, so that is not an option. We just discussed that the court does not have the ability to order the creditor to remove someone from the debt as they are a third party not involved in the suit, so that is off the table. So, what do you do?

You Have Several Options

1. Sell the car and buy a new car in your name only. This is the preferred option as it is the easiest and the cleanest. The court may also order this, but remember that you are asking the judge to take away someone’s sole mode of transportation. That is a big ask.
2. Refinance the car. This is more difficult as many people cannot qualify without their spouse. This is the next preferable option because if the spouse can qualify to refinance the car, it is like re-buying it. The debt would then belong only to the person who refinances. The court will not typically order this as they have no control over whether the person qualifies for the new loan.
3. If neither of the above is possible, you are left with a divorce decree that awards the car and debt to the party keeping the car. This does not remove the other spouse from the debt despite a court order saying it does. Why? See above. The court does not have the power to do that. This is not the preferable option for two reasons.
   • First, the spouse can default on the loan. If that happens, your options are:
     • Do nothing. Obviously, your credit rating, and your ex-spouse’s, takes a hit.
     • You can pay the outstanding debt to protect your credit and then file an enforcement with the divorce court to recoup your expenditure on the debt your spouse was supposed to pay. The problem is that even if the court awards you the funds you paid, there is no way to collect it. If your ex-spouse isn’t paying the car note when they were ordered to, do you think they will pay this? The court cannot put them in jail for not paying the debt or paying you, as that violates the Texas Constitution.
     • You can add a provision to the divorce decree that states if payments are missed, the car is awarded to the other spouse to then sell. The problem is, how do you actually get the car? Do you have the keys? Perhaps you file an enforcement to get the car. Will the court really take away a person’s only mode of transportation? And what if you do get the car? Then what? What if the car is upside down, meaning more is owed than what it is worth. Are you going to cover the difference?
   • Second, your name is still tied to a debt that shows on your credit report and could affect your ability to qualify for a loan in the future.

What if Our Car Is Already Paid Off? Who Receives It in This Case?

If the car was purchased and already paid off before the marriage, it is likely to be considered separate property and belong to whoever bought the vehicle prior to marriage. If, however, the couple bought the car during the marriage and paid off the car together during the marriage (or even one person paid it off during the marriage), the car could be considered marital funds or marital property, which means it would be subject to equitable division by the courts.

If the Car Was Purchased Prior to Marriage, Who Receives It in a Divorce?

If a car was purchased before the marriage and has only one spouse’s name on the vehicle title, it might be considered separate property. Texas is a communal property state. This means that family law considers all property and debts acquired by the couple during their marriage to belong equally to both spouses. As such, it is subject to “just and right” division. Separate property, by contrast, is property that was owned by one party before the marriage, property that was inherited by one spouse, a gift that was made to one spouse, or a personal injury award to one spouse for pain and suffering.
If the car was purchased prior to the marriage, it would remain the separate property of the person who brought it into the marriage. Only the date of the purchase is relevant, not where the car was purchased. If purchased before marriage, the car is separate property. If purchased after, it is community property.
Things can get muddy if you financed the car. If you took out a car loan before the marriage but later used marital funds to make car payments, the car may be considered marital property and be divided during the divorce process. Alternately, the court can order a reimbursement for the payments. If the car was purchased as a gift, it may be seen as the separate property of the person to whom it was gifted.
If you are concerned about property division in your divorce settlement, contact our Dallas law office to simplify your divorce and rest easy.

What if We Have Two Cars, and I Typically Drive the Less Expensive One?

If you have two motor vehicles that are paid off, and you tend to drive the less expensive car, the courts will likely offset the difference when dividing the property. The courts may require a valuation of each vehicle, and you may be awarded money based on the difference between the two cars during the personal property settlement to ensure everything is equal and fair. This is not always the case, but courts in Texas strive for the “fair and right” division of property.

What is Marital Liability in Texas?

Marital liability in Texas divorce law refers to the debts you incur during your marriage. Whether it is a credit card run up by a single spouse, a mortgage taken out by both spouses, the refinancing of an existing mortgage, or any other form of debt accrued during the marriage, it is the responsibility of both spouses to pay it fully. The debts will be distributed between divorcing couples along with other marital property.

What Other Assets Are Considered Community Property in Dallas?

Texas is, again, a community property state. This means that any assets accrued during the marriage may be considered marital assets under Texas law and be subject to property division. Such property can include, but may not be limited to:

• Money
• Real estate
• Retirement accounts

Every divorce case is unique, and what constitutes a spouse’s separate property during divorce proceedings can become contentious. Your Texas family law attorneys can help you ensure that any legal issues surrounding marital property law are indeed fair and equitable.

Contact a Texas Divorce Attorney

As you can see, dealing with third-party creditors, whether it’s for a car, house, or anything else, can be quite difficult. Take the time to figure out how you want to handle this before you file for divorce, and discuss your options with your Dallas divorce attorney and your spouse.

Don’t Lose Your Main Form of Transportation

Texans fight for what belongs to them, and when you are fighting for a fair divorce settlement, it can be a painful battle. Chris Schmiedeke is an experienced divorce lawyer with knowledge of all areas of Texas divorce and family law, from alimony and child support to child custody and marital property division. If you are facing a contentious divorce and you need someone in your corner, let us help. Get in touch with our law firm today at 214-989-7375 or by using our online contact form to speak to a member of our legal team. We’ll help keep your divorce simple and straightforward.