With the downturn in the economy, many people are going back to school to increase their chances of finding better or new employment. Now what happens to those student loans during a divorce?
In determining what happens to the student loans during a divorce, the court looks at a few different factors. The first factor is when the student loan debt was incurred and the second factor is why the student loan debt was incurred.
Generally, under section 20-107.3 of the Code of Virginia, all property, including debts, acquired by either spouse during the marriage is presumed to be marital property in the absence of satisfactory evidence that it is separate property. As a result student loans acquired during the marriage are generally considered marital debts. For example in a recent unpublished case, Kim v. Lee, which was decided in 2014, the Virginia Court of Appeals found that a husband’s student loan debt incurred after the date of the marriage and before the date of separation, and therefore it was presumed to be marital debt. Second that the evidence presented by the husband showed that the loans were for the purposes of his education and his family and that he had even given a portion of the funds to his wife for her use. Further, that the loans increased husband’s earnings for the benefit of the family. As a result, the court found the student loan debt as marital debt and ultimately due to the length of the marriage, the original purpose of the loan, and disparity in the parties’ earning potential, the court allocated seventy percent (70%) of the debt to the wife.
However, in a separate case , the Virginia Court of Appeals dealt with the issue of a spouse who failed to provide records to substantiate the amount her total student loan debt or the portion related to the parties’ living expenses during the marriage. In addition, the wife’s testimony contradicted her claim that the debts were only during the marriage. As a result, the court found that the wife failed to present sufficient evidence regarding what portion of the debt she claimed to be marital.
Given the complexity of this issue and the impact that it could have on the division of your property in a divorce, it is strongly encouraged that you speak to any attorney regarding this issue. If you have further questions, then call the Dua Law Firm for a free consultation.