Divorce proceedings focus on separating the financial and legal circumstances of spouses so they can live separate, single lives. Couples typically have to find ways to split up their property. Many couples also have debt that they need to address when they divorce.
Mortgages, car loans and credit card balances are often top priorities during financial negotiations. In some cases, there may also be student loans to consider when addressing financial matters. Typically, student loans are solely in the name of the individuals who attended college.
Do debts generated by higher education ever impact the distribution of property during divorce proceedings?
Student loans could be part of the marital estate
When determining what debts are subject to equitable distribution rules, the courts don’t give much consideration to the name on the account. Instead, the most important factor is when the individual took on the debt.
Typically, financial obligations that originate during the marriage are part of the marital estate. While a student loan might theoretically be in the name of one spouse, the debt might technically be a marital financial responsibility. Debts accrued during marriage are often subject to division during divorce proceedings.
Student loans usually represent a desire to improve earning potential and to improve the financial circumstances for the entire family. They are therefore potentially subject to division when couples divorce. They can drastically alter the outcome of property division proceedings, as many college students graduate with tens of thousands of dollars in debt.
Those preparing for negotiations or litigation may need to look carefully at financial records to clarify whether student loans could be part of the marital estate. In some cases, the spouse who did not attend college may have to share in the responsibility to repay educational debts.
Other times, spouses can negotiate arrangements in which they use marital assets to repay the marital portion of certain debts. Sometimes, each spouse might assume responsibility for certain debts. It is even possible to use the value of certain marital assets to offset the debts that spouses accept responsibility for after the divorce.
Learning more about equitable distribution rules can help people understand what might happen when they divorce. Student loans and other outstanding debts can be a source of conflict that spouses have to address carefully during divorce negotiations.