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?
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 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.
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.
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.
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:
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.
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.
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.
I was born in Dallas and spent the majority of my life here. I moved to Denver in the middle of the first grade and moved back to Plano in the middle of the eleventh grade. I graduated from Plano Senior High in 1984 and then attended Richland College and the University of North Texas where a received a Bachelor of Business Administration. From there I attended the Texas Tech University School of Law and was licensed to practice law in May of 1993.