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Divorce and student loans

New York, like many other states, uses equitable distribution when deciding how to divide marital property. Equitable distribution does not mean dividing assets in half. In these states, the court uses many factors during the property division process. Couples often don’t agree when defining a fair division of their assets, and there are even more disagreements about how to divide any debt that was acquired during the course of the marriage.

There are the typical debts of marriage to consider. These include car loans, mortgages, credit card debt and personal and business loans. However, many couples also find themselves with large student loans, and many people wonder if that type of loan is considered to be a separate or marital debt. The answer depends on several things including how the loan money was used and whether a degree was obtained. New York considers professional degrees to be part of the marital property. It would seem that the money spent on the degree would be joint debt.

However, part of the way the courts calculate equitable distribution is to consider each person’s ability to support themselves and any dependents after a split. A spouse who doesn’t have an income or earning potential because, for example, he or she was the one home with the kids, is less likely to be required to pay for half of the other spouse’s student loans. In cases of equal earning, the division of student loan debt may depend on how much both spouses have financially benefited from the education.

It is possible for couples to protect themselves from each other’s debts by preparing a pre-nuptial agreement that spells out who will be responsible for certain debts. A pre-nuptial can also provide a channel for clear communication about finance in a marriage, or it can make the transition to single life easier if the relationship fails.

Source: Forbes, “Are Student Loans Incurred During The Marriage Considered Marital Debt?“, Jeff Landers, December 17, 2013

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