Who Keeps the Car in a Tennessee Divorce When It’s Financed?

When a car is still financed at the time of divorce in Tennessee, two questions arise: Who keeps it, and who pays for it? Courts must look at both the title and the loan note, then divide the vehicle and its debt under Tennessee’s equitable-distribution law. Any workable plan must also align with lender rules—otherwise, the decree may look sound on paper but fail in practice.

This guide explains how Tennessee judges classify vehicles, allocate remaining balances, set refinance or sale terms, and protect credit while the case is active.

Title, Loan, and Creditor Rights

The title shows ownership of the vehicle. The loan agreement governs liability to the lender—two distinct legal relationships.

If your name is on the note, you remain a borrower until payoff or refinance. A divorce decree cannot rewrite a private credit contract. Tennessee law requires every divorce judgment to warn that it does not necessarily limit a creditor’s right to collect from any party on the account. See Tenn. Code Ann. § 36-4-134.

Because of that rule, most divorcing couples either refinance the vehicle into one spouse’s name or sell it to clear the balance. Keeping both names on the loan after divorce often leads to late payments, credit damage, and repossession disputes.

Classifying the Car: Marital or Separate Property

Tennessee follows equitable distribution, not community property. Under Tenn. Code Ann. § 36-4-121, the court must classify all property and debt as either marital or separate, then divide the marital estate fairly—though not necessarily equally.

A vehicle is marital property if it was purchased or financed during the marriage with marital funds, even when titled in one spouse’s name. It is separate property if acquired before the marriage or received as an individual gift or inheritance.

When a pre-marriage vehicle is traded in and the equity (positive or negative) is rolled into a new loan during the marriage, Tennessee courts usually treat the new car and its financing as marital property and marital debt, because the transaction occurred within the marriage.

Once classification is clear, judges weigh the statutory factors: each spouse’s contributions to the marriage, their economic circumstances, transportation needs, and the feasibility of refinance. These factors come directly from § 36-4-121(c) and (i). See also Cutsinger v. Cutsinger, 917 S.W.2d 238 (Tenn. Ct. App. 1995) (division must be equitable based on statutory criteria).

Who Keeps It and Who Pays It

There is no automatic answer. Courts look at who uses the car, each spouse’s ability to make payments, the equity or negative equity, and overall fairness.

If one spouse relies on the car for work and can qualify for refinance, the court often awards that spouse the vehicle and assigns them the remaining loan. The other spouse may receive an offset in another asset.

When the car is underwater, that negative equity is still marital debt. The spouse keeping the car usually assumes the loan, while the other receives a balancing credit elsewhere in the property division.

Tennessee judges try to avoid leaving both ex-spouses on a joint loan indefinitely. The practical solutions are keep-and-refinance or sell-and-payoff. A decree that leaves both parties on the note with no timetable almost always results in conflict and credit damage.

What Final Orders Typically Include

Divorce decrees in Tennessee involving financed cars often contain four common provisions:

1. Award of the vehicle to one spouse.
2. Refinance deadline—commonly 60 to 90 days, sometimes up to 120 days if credit repair is needed.
3. Hold-harmless clause requiring the responsible spouse to protect the other from any lender claims while both names remain on the note.
4. Sale fallback if refinance fails—setting deadlines, sale duties, and instructions for applying sale proceeds to the loan and dividing any equity or deficiency.

Because a court cannot compel a bank to approve credit, the sale fallback is essential to protect both parties. In households with multiple vehicles, judges sometimes assign one car to each spouse and order sale of a third to reduce the highest-interest debt and separate finances faster.

If Payments Stop After the Divorce

If the spouse responsible for payments defaults, the lender may report the delinquency against every borrower on the note—long before the court can intervene. While a Tennessee judge can enforce the decree through contempt or reimbursement orders, the safest protection is structural:

• a clear refinance window,
• a sale fallback clause,
• proof-of-payment requirements, and
• continuous insurance and registration coverage.

A well-drafted decree prevents repeat hearings and future credit disputes.

Protecting Your Credit During the Case

Good documentation builds credibility and reduces risk. Before final orders are entered:

• Obtain the title record, current payoff, monthly statements, proof of insurance, and any trade-in or refinance paperwork.
• Pull both spouses’ credit reports and highlight all joint accounts.
• If you drive the vehicle, keep payments current and retain receipts. Courts may consider who paid and who benefited when dividing marital debt under § 36-4-121(i).
• Contact the lender for its refinance and payoff procedures. The lender will not share your spouse’s credit data but can outline acceptable documents and timelines.
• Avoid new joint credit during the divorce, and do not co-sign a new loan. If the car is badly upside-down, discuss a pre-decree sale with your attorney to stop interest from accumulating.

Once these financial steps are handled, the next task is drafting decree language that works in practice.

Practical Decree Structures Used in Tennessee

1. Short refinance window with proof. The spouse keeping the vehicle must apply for refinance within a set period and provide lender responses and monthly payment proof to counsel or a shared portal.
2. Sale protocol. The decree should specify who lists the car, where it is stored, who pays for minor repairs, acceptable price ranges, and how proceeds flow to the lienholder and the parties.
3. Responsibility of the controlling spouse. The spouse in possession must maintain full insurance and registration until the car is retitled or sold. Missed insurance is a major red flag for Tennessee courts.
4. Realistic offsets. When one spouse keeps a car with negative equity and the other keeps a paid-off car, a cash offset or asset adjustment balances the division without stretching payments over years.

Special Situations Seen in Tennessee Courts

• Title in one name, loan in both. The court may award the car to the user-spouse, assign the debt to that spouse, and require refinance or sale within a stated period.
• Co-signer who is not part of the divorce. The decree cannot modify the lender’s contract, but it can still require refinance or sale by a date certain to protect all borrowers.
• Vehicle used to earn income. When a car supports rideshare, delivery, or service work, judges consider its link to earning capacity under § 36-4-121(c)(2).
• Multiple vehicles. Courts may allocate one vehicle per spouse and order the sale of a third to pay down the most expensive note, reducing shared debt faster.

FAQs: Financed Cars in a Tennessee Divorce

1. My name is on the loan. Can the court give the car to my spouse? Yes. Title or loan status does not control ownership. The court may award the car to your spouse and require refinance or sale to remove your name. Protect yourself by keeping written proof of all payments until the refinance closes.
2. How do support orders affect who keeps a car? Child-support and alimony obligations affect each party’s cash flow. Judges factor those numbers into who can afford the monthly payment and how to divide debt equitably.
3. Can we trade house equity for a car loan? Yes, if the overall property division remains fair. One spouse can take more home equity while the other assumes the vehicle debt.
4. Is Tennessee a community-property state? No. Tennessee uses equitable distribution—property and debt acquired during marriage are divided fairly, not necessarily equally.
5. How do courts handle other debts alongside a car loan? All marital debts—student loans, personal loans, credit cards, and car loans—are considered together. Judges assign each based on who incurred it, who benefited, and who is best able to repay.
6. The car was bought before marriage. Is it still separate? Usually yes, but if marital funds paid down the loan or increased its value, a partial marital interest can arise under § 36-4-121(b)(4).
7. My ex stopped paying after keeping the car. What should I do? Contact the lender to verify status, document missed payments, and file for enforcement in the same divorce case. The court can compel payment or order sale.
8. Can I remove my name from a joint car loan without refinancing? Almost never. Most lenders require payoff or refinance before releasing a borrower.
9. How do custody schedules affect car assignments? If one parent must drive regularly for exchanges or school, the court may award that parent the car and assign the debt, provided payments are sustainable.
10. What documents should I gather for court? Bring title or registration, payoff letters, insurance proof, payment history, and a post-support budget showing ability to pay. Strong records speed resolution and reduce disputes.

Practical Next Step

List the vehicle’s payoff amount, market value, and the names on its title and loan. With that information, a Tennessee divorce attorney can design a decree that sets a refinance deadline, a sale fallback, and realistic offsets that protect both parties. Early clarity minimizes credit damage and post-divorce litigation.