Will a notarized agreement regarding a car loan hold up in divorce court? 4 Answers as of March 10, 2011

My wife has suddenly filed for divorce. In the petition she has only asked for the divorce itself and her maiden name restored. We have no kids or property to divide other than two vehicles. She did not include the vehicles in the petition because she knew we would agree on dividing them. We have agreed that I will keep the older car which is paid off and she will keep the newer car that still has monthly payments. She has signed the older car over to me, however, the dealership has said that in order to remove my name from the newer car loan, she would have to refinance it in her name only. This will increase the interest rate and the car payments for her significantly. Is there a way to leave this car loan in both of our names, but sign and notarize some kind of separate agreement saying she is legally responsible for it? Would something like that hold up in court if she defaulted? If she had an accident in it and hurt someone, would I be responsible too? If I stayed on the loan, should I also stay on the car title? A friend mentioned a form called a Marital Settlement Agreement that we could have notarized, would that be a legally binding agreement?

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Law Office of Curry & Westgate
Law Office of Curry & Westgate | Patrick Curry
You can make an agreement such as you are suggesting, however it does have problems, such as insurance, liability for if she quits paying. See a family law attorney to word the document correctly.
Answer Applies to: California
Replied: 3/10/2011
Warner Center Law Offices of Donald F. Conviser
Warner Center Law Offices of Donald F. Conviser | Donald F. Conviser
Because of the property and liability issues, you would be safest to file a Response in the divorce case addressing the two vehicles, and to enter into a Stipulated Judgment (with or without a MSA), awarding your car to you, awarding her car to her, providing that she will pay all obligations on and in connection with the car awarded to her (including but not limited to the car loan), and hold you harmless from, indemnify you, and defend you against any obligation due on the car and any liability in connection with her ownership of and/or use of that car, including but not limited to personal injury and/or property damage claims.

However, if your wife were to declare bankruptcy, she could discharge those obligations to you.

If you just enter into a MSA with your wife and you don't file a Response in the divorce case and allow the case to go by default, you have no assurance that your wife will submit the MSA to the court, and you will be powerless to enforce it if she doesn't submit it to the court.

Your name should be removed as a Registered Owner of her car because the registered owner of a car can be held liable for injury or damage claims for accidents involving a permissive user of the car.

The legal title of the car will likely be and remain in the lender's name until the loan is paid off. Your lender will not allow you to be removed as an obligor under the existing loan.

It would, of course, be best if your wiferefinances the car, because in this economic season, interest rates are low, but whether she is able to refinance the car will depend upon whether or not she can qualify for a new loan with the same lender or another lender.

I would suggest that you and/or your wife contact the existing lender (and other lenders) and find out what terms they would extend to your wife if she refinances the car.

If your wife refinances the car and you are removed as an obligor on the loan and as a registered owner of the car, you could avoid the need to file a Response to her Petition and the need to enter into a MSA and/or a Stipulated Judgment, and you could allow her status-only (and name change) Divorce to proceed uncontested.
Answer Applies to: California
Replied: 3/10/2011
Michael Rose Attorney at Law
Michael Rose Attorney at Law | Michael Rose
A notarized statement shows that the person who signed it is that person. The car company does not care if you have an agreement with her. When you purchased the car there was a car contract and as far as they are concerned you both are on the contract to pay.
Answer Applies to: California
Replied: 3/10/2011
Diefer Law Group, P.C.
Diefer Law Group, P.C. | Abel Fernandez
You can do this through your divorce decree.
Answer Applies to: California
Replied: 3/10/2011
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