How are the cars divided in your Texas divorce case?
After dividing cars in hundreds of divorces in Texas, it occured to me that people need a better resource for figuring out their options. After searching the web myself on the topic, just to see what is out there, I noticed a couple of patterns.
Most every resource says that you can transfer title as a part of your divorce by using a certificate to transfer title or a power of attorney form. Most all resources vaguely say that you should not remain on the same title as your spouse due to the liability exposure.
None of this is very helpful when you really want to be able to picture what is going to happen with your car once your divorce is over. I hope to help you with some of those questions on this webpage.
In order to write this webpage, we not only searched the entire web for other information, but we called (and waited on the telephone) and eventually we talked to the Departement of Motor Vehicles in Texas and ask them exactly what happens when a person brings these vehicle transfer forms and a Divorce Decree to their Office.
Here is a Video Explaining the 4 Main Options for Dividing Your Vehicle Title & Ownership in a Texas Divorce
© 2017 by Cook & Cook Law Firm, PLLC, All rights reserved
Summarizing the Video, and the 4 Ways to Handle the Car in Your Texas Divorce
Option 1 - Keep Your Car
The easiest way to handle the car award in your divorce is if you have the car in your own name (only) and your loan is in your own name. In that case, all you need is a properly written decree, awarding you the asset and liability of your car, and you are all set.
Option 3 - Keep the Car & Refinance the Note
The third option applies when there is an outstanding balance on the car. In this scenario, the spouse receiving the car will be ordered in the decree to refinance, and upon refinancing will receive a lien release letter. Both items will be brought to DMV to get title free and clear from the former spouse.
Option 1 - Keep Your Car, Take Him Off
The next best scenario is if you have a car in both parties’ names but there is not debt on the car. In this situation, you just need a properly drafted certified decree, you bring it to DMV and you can transfer the title to your name alone.
Option 4 - Keep the Car & Both Spouses Stay on The Loan/Title
The fourth option is a the least advisable, but very common. When a spouse cannot pay off the car, or refinance it in her name alone, both spouses will remain as obligors on the original car lien. The receiving spouse of the car will be ordered to pay the car payments in the decree. In this scenario, the spouse that does not receive the car, still remains on the title (even if there is a power of attorney to transfer motor vehicle), and will remain there until the car is paid off or refinanced. In this scenario it may be best to have the spouse that did not get the car have rights to repossess the car in the receiving spouse fails to pay.
Former Spouses Getting Sued for Vehicle Loans, on Cars They Did Not Receive in the Decree of Divorce
The terms of your divorce decree does not change the terms of your original car loan.
As we say in the video above, it is highly advisable to refinance any joint vehicle loans, or sell the vehicle. Even if the decree awards your spouse the vehicle loan, the financing company still views both people that signed the loan, as responsible for it.
My now, ex husband and I bought a car in 2006 when we were married. I was the buyer and he was co buyer. Then we were divorced November 2007 and the car was put in the divorce decree to be given to him and that he would take over payments etc. He then got the car repossessed in July 2009. I was just served with papers that I am being sued for the $2500 left on the account. Is there a statue of limitation on when they can sue me? And shouldn’t he be the one to be sued over this since it was left to him in the divorce decree?
The Liability Follows the Car, So If You are On the Title After the Divorce, the Liability Follows You.
The Texas Department of Motor Vehicles, advises that the liability follows the car itself. Many spouses decide that they will not refinance the vehicle to satisfy the original loan in the divorce. So, one spouse executes a power of attorney to transfer the vehicle to the other spouse. And, the receiving spouse brings the document to DMV. DMV will not allow you to take title of the car with this document. It will only allow you to keep the car up-to-date, registered, inspected etc. The title will not go to you until you bring DMV a lien release letter, showing the title is free and clear and ready to be transferred.
Thus, even with the power of attorney to transfer the motor vehicle, your ex-spouse is still on the actual title, until the original note is satisfied. Thus your ex-spouse is at risk of being sued for your car accidents or negligence. Your spouse could be sued for negligently entrusting you with the motor vehicle.
If There is Not a Car Lien, It Is Relatively Easy to Transfer the Title in a Divorce
Keep in mind that the issues with joint liability really arise due to the joint debt. The joint debt on the car is what prevents the owner from tranfering the entire title of the car to his/her name after the divorce. If after your divorce, you have a certified decree that awards you complete title, and a lien release letter that shows there is no debt on the car, these two documents will enable DMV to transfer the title to you free and clear, right away.
Questions About Your Car in Divorce?
Megan Victoria Cook
Texas Divorce Lawyer & Managing Partner of Cook & Cook