Jan 2, 2026
When you go through a divorce, your financial life can shift fast, especially if you’re trying to keep up with the same lifestyle without your former partner’s income.
How your assets are divided also plays a big role in your future stability. If you end up with a truck that’s worth more than $7,000 less than the remaining loan balance, you’ll need to figure out your next steps. Things get even more complicated if your ex wants the loan closed, which could push you into refinancing at a higher rate and putting more strain on your monthly budget.
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If you’re facing this kind of upside-down loan, here are some ways to get things under control (1).
Talk with your lender
Most lenders want to avoid repossession, so they may be open to discussing alternatives if your loan is deep underwater and you’re struggling to stay afloat.
Since auto loans are backed by the vehicle, lenders can still come after the remaining balance if they take the car and sell it for less than what you owe. Because of that, they’re not likely to knock down your balance unless they think you truly can’t pay. But they might offer a refinance option or adjusted payment terms to make things more manageable (2).
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Consider selling or trading in the vehicle
Selling or trading in the truck is another route. Edmunds notes that about a quarter of trade-ins on new cars involve negative equity. Many people simply roll the debt into their next loan, but that usually makes the problem worse by raising payments and sinking them even deeper into the red (3).
This option works best if you can cover the $7,000 gap and switch to a lower-cost vehicle. If you have the savings to wipe out the shortfall and buy something more budget-friendly, this can give you the best reset.
Why voluntary surrender doesn’t help much
Handing over the truck to the lender before it gets repossessed might sound like a responsible move, but it rarely benefits you.
The lender will still auction off the vehicle, likely for less than you could get from a private buyer, and they’ll tack on extra fees. You remain responsible for the remaining balance, and the surrender can damage your credit enough to make future borrowing more expensive (4).
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Creating a financial plan to repay the debt
If you can afford the payments, focusing on a repayment plan may be your simplest fix.
Putting extra money toward the loan can help you erase the negative equity and eventually trade the truck for something more affordable. Or you may decide to pay the loan off entirely and hold on to the vehicle for as long as possible to avoid taking on another loan.
Get professional help
A financial advisor can walk you through the numbers and help you decide on the best path forward. They can look at your post-divorce income, expenses and long-term goals to map out a strategy that fits your situation.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Reddit (1); Experian (2); Edmunds (3); Ramsey Solutions (4).
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
