Couples getting a San Jose divorce usually assume that student loans are the responsibility of the person who incurred the debt. However, this is not necessarily the case.
Student loans taken out before a couple is married are generally the responsibility of the person who incurred the debt. Potential problems and/or complexities can occur if one spouse was a student during the time of the marriage and/or if payment(s) on the loan(s) are made using community property funds. (This blog posting is limited to Family Law issues, and will not, for instance, delve into the nuances of the bankruptcy code and/or the likelihood that those student loans cannot be discharged in bankruptcy).
At least several legal principles could be considered in order to sort out what to do with student loans in a divorce: (A) Debt used to pay living expenses during the marriage is generally a marital/community obligation, whether it’s in the form of credit card debt or student loan debt; (B) the time the debt is incurred can create a presumption regarding whether it is separate or community debt (SEE FC 760, 770, 771); (C) separate debts are generally assigned to the party who incurred them (SEE FC 2625); (D) but student loans are generally assigned (FC 2627) based upon the rules set forth in Family Code 2641; and (E) the assigning of these debts could be considered by the Court when it sets any spousal support Order (SEE FC 4320(b) & (e) and SEE FC 2641(d)). So if your spouse took out student loans and you used some of the money to pay for your rent and to buy food, a portion of the student loan likely is a marital debt that both spouses are liable for.
Like any other form of investment, not all student loans generate the same results. Family Code 2641 allows the marital/community estate to be reimbursed for the payment of loan(s) (or the direct payment of tuition, etc.) that substantially enhances the earning capacity of a party (SEE AGAIN FC 2641(b)(1)). That statutory language could mean that loans taken out and/or community funds spent on a great art, dancing, photography, or music course that never results in any job or pay increase might not get a reimbursement. Conversely, community funds spent to get a technical certificate that results in an immediate new job with better pay could stand a much better chance of getting a reimbursement. The nuances in between these extremes is where a good divorce lawyer does their work, characterizing that education as either ultra valuable (if counsel represents the party seeking reimbursement) or describing it as a failed investment that yielded no benefits (if counsel represents the party who got the education). Counsel works best with these type of issues when there are good written records to support the chosen theme.
If both spouses attended school during the marriage, the court will take into account the efforts of one spouse to support the other when deciding how to divide up the student loan debt. For example, if the wife borrowed money to pay for school and living expenses, but later worked to put her husband through school so he would not need any student loans, the court could set off a portion of the later community payments towards husband’s education against wife student loan debt(s) (SEE FC 2641(c)(2)).
If your divorce involves a significant amount of student loan debt, it is essential to contact a qualified Bay Area divorce lawyer who can advise you on the best strategy for obtaining a fair divorce settlement, and which written records you should try to locate to prove up your claim(s). There are many factors involved in dividing debts during a divorce, so it’s crucial to have someone on your side who understands the finer points of California divorce law.