The responsibility for student loan debt in a divorce situation

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A marriage breakdown is emotionally draining, and it can be especially so when it comes to the financial picture. Arizona residents going through a divorce and who have been carrying student loan debt may be wondering if their soon-to-be former spouses may be responsible for helping them to pay those loans since the division of property includes not only assets but debts. If the student loan was taken out before a person got married, he or she is responsible for paying it; however, if that loan was secured during the marriage, it can become complicated.

Community property state

Arizona is a community property state which means assets and debts are divided equally, so any loans acquired after marriage are typically split evenly between spouses. There may be some exceptions, however, depending upon the individual situation. If there is some contention regarding a student loan, a family court judge will look at things like whether a marital agreement was in place, any increase in income that came from the education, the timing of the divorce in regard to schooling, and whether the couple has any significant assets.

In a community property state, assets and debts acquired during a marriage are considered jointly owned by both spouses and are divided equally upon divorce. This means that both parties are entitled to half of the marital property and are equally responsible for debts incurred during the marriage. It is important to note that property and debts acquired before the marriage or after the separation are generally considered separate property and are not subject to division.

Whether a spouse co-signed the loan agreement could also have an impact. A judge may also look at whether part of the loan was used for living expenses shared with a spouse. If all the loan went toward education and its costs, it’s likely the person who took out the loan will be solely responsible for paying it back.

Debt in the Divorce Process

especially in the context of a divorce, gathering relevant information is crucial to making informed decisions. To begin the process, both parties should compile a comprehensive list of their individual and joint debts, including student loans, mortgages, credit cards, and personal loans.

Next, determine the status of each loan, including the outstanding balance, interest rate, loan term, and monthly payment. Obtain the original loan documents, if possible, to review the terms and conditions, particularly in the case of student loans. This information may reveal whether the loan was co-signed, which can impact the division of debt in a divorce.

It’s also essential to understand the purpose of the loan. Identify if the funds were used solely for educational expenses or if a portion was allocated for living expenses shared with the spouse. This distinction can influence a judge’s decision when dividing student loan debt in a community property state like Arizona.

  • Gather any available evidence of financial contributions made by both spouses towards the loan. Records of payments and bank statements can help demonstrate each party’s involvement in repaying the debt.
  • Analyze the impact of the education financed by the loan on the couple’s financial situation. Examine any increase in income or professional advancement resulting from education and consider the timing of the divorce in relation to schooling.
  • Review any prenuptial or postnuptial agreements that may address the division of debts, including student loans, in the event of a divorce. These agreements can provide guidance on how to handle the loans during the divorce proceedings.
  • Lastly, research the laws and regulations in your state regarding the division of marital property and debts. Familiarize yourself with how community property states, like Arizona, handle the distribution of assets and liabilities in a divorce.

Student Loan Debt, Military Benefits, and Student Loans in Divorce

When a divorce occurs involving military personnel, the division of military benefits can be a complex issue. The Uniformed Services Former Spouses’ Protection Act (USFSPA) governs the treatment of military benefits, including retirement pay, in the event of a divorce. It’s important to note that the USFSPA does not automatically grant a portion of a service member’s pay to the former spouse; instead, it allows state courts to treat military retirement pay as marital property subject to division during divorce.

Here are some key points on how military benefits may be affected for the spouse in a divorce:

  1. Military retirement pay: The division of military retirement pay depends on the laws of the state where the divorce is filed. In community property states, the retirement pay is generally divided equally. The “10/10 Rule” applies in some cases, which means that if the couple has been married for at least 10 years and the service member has completed at least 10 years of creditable military service during the marriage, the former spouse may receive direct payment of their share of the retirement pay from the Defense Finance and Accounting Service (DFAS).
  2. Survivor Benefit Plan (SBP): The SBP provides a monthly income to eligible beneficiaries after the death of a service member. During divorce proceedings, the former spouse may be designated as the beneficiary of the SBP, either by voluntary agreement or court order. This ensures that the former spouse continues to receive financial support even after the service member’s death.
  3. Healthcare benefits: The length of the marriage and the service member’s active-duty status can impact the former spouse’s eligibility for healthcare benefits. Under the “20/20/20 Rule,” a former spouse may retain full military healthcare benefits (TRICARE) if the marriage lasted at least 20 years, the service member has completed at least 20 years of creditable service, and there is an overlap of at least 20 years between the marriage and military service. If the marriage doesn’t meet these criteria, the former spouse may qualify for temporary coverage under the “20/20/15 Rule” or may need to seek alternative healthcare options.
  4. Commissary and exchange privileges: Commissary and exchange privileges are typically available to former spouses who meet the 20/20/20 Rule requirements. However, if the former spouse remarries, these privileges are lost.
  5. Child support and alimony: Military members are required to provide financial support for their dependents, including child support and alimony. The amount and duration of support payments will depend on the state laws and the specific circumstances of the divorce.

It’s essential for both service members and their spouses to consult with an experienced military family law attorney to navigate the complexities of dividing military benefits during a divorce. An attorney can provide guidance on each party’s rights and obligations, ensuring a fair and equitable resolution.

Contact a Family Attorney

When Arizona residents have questions about issues that could impact their divorces — like student loans — it may be wise to contact a family law attorney experienced in divorce issues. A lawyer can advocate the specifics of his or her client’s case. An attorney can review a client’s particular circumstance and may be able to offer insight as to what is the best achievable result.

To better understand how student loan debt is handled in divorce cases, you can visit the U.S. Department of Education’s guide on repaying student loans and the National Conference of State Legislatures’ overview of state laws regarding marital property and debts. Additionally, you can consult with experienced attorneys here at RPM Law.