Protecting a California spouse from divorce and student loan debt
Student loan debts have played a big role recently in Americans’ overall consumer debt. California residents may be somewhat surprised to discover that student loan debt is now also a potential legal issue during divorce.
In divorce proceedings, marital assets are subject to division, a fact that often concerns spouses when they consider what they might gain and lose in a divorce. In addition to marital properties, debt acquired during the marriage is also divided between the couple – and that may include student loan debt.
Whether student loan debts actually are considered marital debts or separate debts depends on the circumstances. For example, if student loans were used by one spouse for tuition, school fees and books, then the debt may be considered to be a separate debt. If the loan was used to pay for living expenses and other household costs, then it is likely to be considered marital debt.
Several factors must be considered to determine whether or not a student loan is marital debt. Answers to certain questions may be decisive. For example, if both spouses benefitted from the student loan debt, then a court would be more likely to consider that a martial debt.
In community property states like California, debt is generally divided 50:50 as in asset division. However, divorcing spouses are usually not especially willing to take on debt as part of a divorce settlement. Debt division can pose disadvantages to one or the other party, depending on the tax consequences and other legal issues.
Fortunately, California residents can protect themselves from the pitfalls of marital debt with a prenuptial agreement. A prenup is a written document that can clarify the financial rights of both spouses in a marriage and protect one party’s assets in divorce. It can also protect one party from debts incurred by the other spouse.
Source: Forbes, “Are Student Loans Incurred During the Marriage Considered Marital Debt?,” Jeff Landers, Dec. 17, 2013