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Buying a new car in the middle of a divorce

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Sometimes in the middle of a divorce, your car breaks down and you realize that it is time to replace that old junker and get a new car. Can you do that in the middle of a divorce? If so, is it marital property? Can you take a loan out on the car? What happens to the value of the car you are trading in?

The starting point for looking at this issue is to understand that you are basically married to the day you are divorced; that means, that anything you acquire before the marriage, during the marriage, and while you are going through a divorce is marital property. Presumptively, it has to be divided 50/50 at the time of the divorce.

So, while you technically can go out and buy a new car or better used car in the middle of the divorce, if there is any equity in that vehicle, your spouse will have a 50% claim to the equity value of the car. You also cannot impair the other parties’ credit in the middle of the divorce. There is a prohibition on incurring new debt against the credit of the other spouse, without their consent. While there is no law that you can’t obtain a new loan or apply for credit, you can’t obligate your soon to be ex spouse on  that loan or debt obligation, unless they consent. That means that any auto loan you take out will be entirely your responsibility. The equity in the car will be determined by it’s fair market value on the date of the divorce against any loan indebtedness on the car. If the car is worth $20,000 and you have  $10,o00 car loan, you have $10,0o0 of equity and will wind up owing your spouse half the value or $5,000 as part of the division of the estate.

A better way to acquire a new car, and avoiding having to pay your spouse anything for the new car, is simply to lease a new car. It is like renting and there is no ownership value to the car. You sort of kill two birds with one stone; (a) you get a brand new car and (b) you don’t have to pay your spouse 1/2 of the value for it.

If you have questions about going through a divorce, contact the experienced divorce lawyers at Karp & Iancu, S.C. today.

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