DO BOTH SPOUSES HOLD LIABILITY FOR STUDENT LOANS AFTER A DIVORCE?

On behalf of Askvig & Johnson, PLLP 

As previous postings in this blog have discussed, when a couple in Minnesota decides to divorce there are many tense subjects that may lead to heated and emotional disagreements between the already sometimes-unhappy couple. Sometimes, one of these subjects is property distribution.

Property is distributed between a divorcing couple based upon the state's family law standards. Some states are community property states and anything that is considered marital property or a marital asset is split evenly between the two people. Other states, including Minnesota, are equitable distribution states and marital assets are split in a way that the court considers fair and equitable.

Separating couples do not always consider that debt may also need to be divided between them upon divorce. With the escalating costs of obtaining undergraduate and graduate degrees, numerous individuals have accrued student loan debt. Some of these student loan debts are rather extensive, and when a couple decides to split, the question arises as to whether the liability for this debt will belong to the student that incurred it or whether the couple will be jointly liable to pay it off.

Different states have decided this issue in different ways but there are a few considerations that may help in determining who will be responsible for student loan debt. It is first important to understand what the money was used for, whether the degree was actually earned and, if so, whether that degree is considered marital or separate property. If the money was used for books, tuition and other educational expenses, it may be easier to raise the argument that the debt belongs to one person. However, some states consider the degree marital property, and then both individuals may be responsible for the debt.

Next, it is important to consider the income-earning power of each spouse. If both spouses benefitted from the earning power created by the degree, then the state may determine that they both must contribute to loan payments. However, if one spouse stayed at home and did not work so that the other could obtain the degree, the court may find it unreasonable to expect the unemployed individual to contribute to the loan payments.

The moral of the story is that the decision will vary according to state laws and previously determined cases within the state that concern similar issues. A family law attorney would be most familiar with both of these types of information. Those that are struggling to determine who holds liability for debts owed during divorce may want to speak with an attorney who will help them work through these types of confusing and emotional issues.

Source: Forbes, "Are Student LoansIncurred During The Marriage Considered Marital Debt?," Jeff Landers, Dec. 17, 2013