Even if real estate, the marital residence (or former marital residence if one party has moved out) has multiple mortgages, lines of credit or home equity loans and even if one is in such a home “upside-down”, names can be added to or removed from the deed. The loans, however, would remain in the original names unless paid off in full or re-financed. Vehicles with loans attached are very different. If you have a vehicle loan, the lender has the title, unlike real estate where you are actually given your original deed immediately even if you haven’t made a single mortgage payment. Real estate is always there… they don’t make it anymore. Vehicles, on the other hand, decrease in value before you get them off the dealer’s lot. Because of that, the vehicle loan lender keeps the title to prevent its transfer or sale until the loan is satisfied. With real estate, the lender doesn’t care whose name is on the deed. If the mortgage is not paid, the lender will foreclose, evict whoever is living there and sell the property to try to pay off the loan.
So, in a Pennsylvania uncontested divorce, real estate can be transferred from both spouses to one, as can be a vehicle that has no loan attached to it. Just take the title to a notary. It’s simple and cheap. And while a lawyer is not needed for that, a lawyer should be consulted before it is done. Timing is indeed everything and transferring any type of property, real estate or personal, at the wrong time can have dire consequences.
If it is agreed that a jointly-owned vehicle is to become the property of just one spouse and there is a loan either in both names or just in the name of the party who is giving up the vehicle, care must be taken and sound legal advice sought beforehand. If the party receiving the vehicle is able and willing to re-finance the vehicle loan into that party’s sole name, that is an easy path to follow. But if the party receiving the vehicle cannot or will not re-finance but still insists on possession of the vehicle in exchange for not contesting the divorce, what can the other spouse do for financial protection? Believe it or not, many spouses do nothing and simply choose to trust the other spouse to make the vehicle payments. It really is not that much of a risk as the party receiving the vehicle knows the payments must be made or the vehicle will be repossessed. Some clients opt for a settlement agreement wherein the party receiving the vehicle agrees to promptly make all of the payments and hold the other party financially harmless from the loan. In agreements I prepare for my clients, I always include a term requiring a party who does not abide by the agreement to pay the other party’s legal fees if that party must file suit to enforce the agreement. Seeing and knowing that, the party receiving the vehicle would have to pay both lawyers if the loan is not paid. That is usually a really strong inducement to make the payment. Who wants to pay one’s own attorney and the other party’s as well?
I have to report that in the thousands of Pennsylvania divorces that I have handled wherein vehicles with loans were turned over to the other party without a re-financing, whether or not I had prepared a settlement agreement, not one client has ever contacted me about any difficulty regarding the car payments being made. People just make their car payments to keep their vehicles.