Mar 18, 2025
When you get a divorce, your finances can change dramatically — especially if you try to maintain the same expenses while losing your ex’s income.
The division of assets can also affect your long-term financial stability. For example, if you end up with a truck that you owe over $7,000 on than the vehicle is worth, you’ll need to decide what to do about it.
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This is even more challenging if your ex wants to cancel the loan, requiring you to refinance at a higher interest rate, further straining your limited monthly income.
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If you’re in this situation, here are a few options to help manage the upside-down loan and get your finances back in order.
Negotiating with the lender
Lenders prefer to avoid repossession, so they may be willing to work with you if your loan is underwater and they fear nonpayment.
Because a car loan is secured debt, lenders can still collect the unpaid balance if they repossess the vehicle and sell it for less than what’s owed. This means they typically won’t reduce your balance unless they believe you’re unable to pay at all.
However, they may offer refinancing or modified payment terms to make the loan more affordable.
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Selling or trading in the truck
Selling or trading in the truck is another option. According to Edmunds, about 25% of trade-ins for new vehicles have negative equity. Many buyers roll that negative equity into their new car loan, but this is a bad idea — it increases your monthly payment and puts you further underwater.
Selling or trading in the truck works best if you can pay off the $7,000 shortfall and purchase a cheaper vehicle with a lower monthly payment. If you have the savings cover the debt and downgrade to a more affordable car, this is probably your best bet.
Voluntary surrender
Voluntary surrender — returning the car back to the lender, rather than having it repossessed — is not a good idea.
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The lender will sell the car at an auction, often for less than what you could gotten through a private sale, and will add fees to the balance. You’'ll still be responsible for the difference.
This also damages your credit, making it harder to get affordable loans in the future.
Creating a financial plan to repay the debt
If your monthly payments are manageable, making a structured repayment plan can be a viable solution.
By aggressively paying down what you owe, you can eliminate negative equity and eventually trade in the vehicle for a more affordable one. Alternatively, you could pay off the loan in full and keep the truck as long as possible, avoiding another car payment.
Getting professional advice
Finally, consider consulting a financial adviser about your options. They can help you determine the best strategy for handling your car loan based on your overall financial situation and long-term goals post-divorce.
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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.
