Going through a divorce can feel like having your life thrown into disarray and chaos. While there can be many profound emotional and financial changes that come with a divorce, understanding how assets and debts are divided during a divorce can help you prepare for the process.
One question that often comes up during a divorce is what happens to student loan debt. This is especially relevant for couples who have accrued significant student loan debt during their marriage. New York is one of the few states where student loan debt is often considered a marital property and thus potentially subject to equitable distribution. In this blog, we will explore how student loan debt is handled in a divorce under New York state law.
Equitable Distribution in New York
New York is an equitable distribution state. This means that during a divorce, marital property is divided in a manner considered fair and equitable but not necessarily equal. It's essential to understand that the term 'marital property' encompasses both assets and debts accrued during the marriage, including student loan debt.
Here is what courts in New York consider when dividing student loan debt in a divorce:
- Student loan debt incurred before the marriage: Generally, if the student loan debt was taken on before the marriage, it is seen as separate property. Therefore, the person who incurred it would typically be responsible.
- Student loan debt incurred during the marriage: If the student loan debt was accrued during the marriage, it could be considered marital debt. However, how this debt is divided can depend on various factors. For instance, a court might consider who benefited from the education funded by the debt, the earning potential of each spouse as a result of the education, and the overall financial situation of each party.
However, if you and your ex are able to come to an agreement without the court's intervention, you may have more control over how this debt is divided. This could be through a prenuptial or postnuptial agreement or a mutually agreed-upon settlement.
Student Loan Debt Incurred Before Marriage
When student loan debt is incurred before marriage, it is usually considered separate debt. This is because it's tied to an individual's education or career enhancement that occurred prior to the marriage.
Here are a few key points to remember:
- The debt holder is typically solely responsible for repayment.
- In some cases, if the loan was refinanced during the marriage with a joint loan or if marital funds were used to make payments, it could be seen as a joint responsibility.
- The court may also consider whether the degree or credentials obtained from education funded by the debt substantially increased the earning potential of the debt holder, leading to a higher standard of living during the marriage.
Handling Jointly Acquired Student Loan Debt
Student loan debt acquired during the marriage can be a bit more complicated. In New York, this is typically considered marital debt, but the division isn't necessarily straightforward. This is because it is often seen as an investment in the spouse's future earnings rather than a shared expense.
There are a few key factors that the court will take into account when deciding on the division of jointly acquired student loan debt:
- The earning potential of each spouse, taking into consideration the degree or credential funded by the loan.
- Whether both spouses benefitted from the loan – perhaps the loan allowed one spouse to earn more, benefitting the household's overall income.
- The financial situation of each party, including their ability to repay the debt.
In some cases, the court may assign responsibility for the loan to the spouse who obtained the education. But, if the loan benefitted the couple during the marriage, they might decide to divide the debt between both parties.
However, it's important to remember that each divorce case is unique. The way student loan debt is divided can vary greatly depending on the circumstances of the marriage and divorce. If you have significant student loan debt and are considering divorce, it's recommended to consult with an experienced divorce attorney who can guide you through this process and advocate for your best interests.
At the Law Office of Tzvi Y. Hagler, P.C., we understand the complexities of dividing assets and debts in a divorce, including student loan debt. Our experienced attorneys will work tirelessly to protect your rights and ensure that your best interests are represented throughout the process.
If you're going through a divorce in New York and have questions about how student loan debt may be handled, don't hesitate to contact us online or call us at (516) 514-3868 to schedule a consultation.
