Status of Student Loan Debt After a California Divorce

Posted by: Gerald A. Maggio, Esq.

Best Orange County divorce lawyers; The Maggio Law FirmMarriages come with many responsibilities and one of them is supporting a spouse with his/her student loans. Paying back the educational loan can be tough for some and becomes even tougher once a divorce takes place. Current statistics show that college students who take up educational loans end up with huge debts which become hard to pay. In a marriage, the debt can be cleared by both spouse but it’s not as easy as it sounds. It can get complicated and after a divorce, students loans can look like a huge burden.

Finances are an important factor when it comes to a marriage and a divorce and most individuals are extremely cautious about how they spend their money. Debts are never pleasant and paying for something which is not yours can be even more painful.

How is the student loan divided before and after the marriage?

If you and your spouse have taken an equal amount of student loans, then each is responsible for their own debts. In such cases, divorce arrangements become easier to work out. However, if one of you has more debts than the other person, separate arrangements must be made to pay off the debt. Sit with your legal counsel and chalk out a plan to clear the debt. Student loans are often seen as property by a court of law and upon marriage and divorce, it is treated in the same way. So, if you had the student loan prior to the marriage, it becomes a separate property and should be cleared by you. However, if the loan was taken after you got married, then during a divorce, it can be treated as marital property. Then again, if the loan was taken by the person who does not have an income after marriage, the situation becomes trickier. If the other spouse took care of the student loan, then the court has the right to favor him/her during a divorce.

Loans are supposed to be paid by the person who took it but it does not always work out in a marriage. Having a student loan and having a job are not always related. Finances are an important part of divorce proceedings and no individual wants to pay more than he/she has to. Incurring student loan debts can be financially tough for the person it has been burdened with it. Student loan debt issues should be consulted with an experienced Orange County divorce lawyer.

Getting divorced in California can be complicated! Click the following link to download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.

Managing Student Loans During Divorce

Posted by: Gerald A. Maggio, Esq.

Best Orange County divorce lawyers; The Maggio Law FirmIn California, student loans can be considered to be community property, but it depends on the circumstances.

So who pays?

According to California Law, if the student loan was incurred after marriage, it can be considered community property and will be split between both the spouses regardless of whose name is on the loan. If the loan was incurred before marriage, then it is judged to be separate property and has to be paid off for the spouse who opted for it.

While this may seem simple, there are multiple circumstances that could change the provisions made above.  The length of the marriage is a key factor that affects the court’s decision. In a long term marriage, the person that took out the loan will likely have proof that both they and their spouse benefited from the education. The other party will have a hard time proving that they did not benefit and the court usually splits the loan payments.

If both spouses had student loans before marriage and ended up consolidating their loans, both parties are equally responsible for it. The court will not consider the individual loans and terms that were in place before consolidation. The date of consolidation will be regarded as the date of the loan and both parties will continue making payments.

California Family Code sections 2641(b)(1) and 2627 maintain that the community should be reimbursed for community contributions to education or training of a spouse that substantially enhances that person’s earning capacity. The amount reimbursed must include interest at the legal rate, accruing from the end of the calendar year in which the contributions were made.   However, if the parties agreed in writing that there would not be such reimbursement or the contributions were for regular living expenses, then there is no right of reimbursment.

Also, there is a rebuttable presumption under California law that the community has not substantially benefited from community contributions to the education or training made fewer than 10 years before the commencement of the divorce, while it is generally held that the community did substantially benefit from community contributions to the education or training made more than 10 years before the commencement of the divorce.

Couples that are worried about student loans are often advised to have a prenup before marriage. Many take the opportunity to outline their terms for loans and debts. If such a document exists, the Court will follow the same guidelines at the time of the divorce. If there is no prenup or the validity of the prenup is in question, the parties will have to negotiate debt division with each other. If this does not work, mediation might be the only solution before going to court.

Getting divorced in California can be complicated.  Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.  

 
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