Getting divorced can be a challenging and overwhelming time. Couples must think and talk about matters that can be emotionally charged and financially concerning. One of those topics is what happens to student loan debt when the divorce is finalized. If you have questions about handling student loan debt in divorce, consider contacting Colorado Divorce Law Group at (720) 593-6442 to schedule a consultation.
During a divorce, the courts divide up property based on the law of the state. For example, in community property states, most property (which includes assets and debts) is considered marital property if it is acquired after the marriage. In other states, like Colorado, marital property is typically any property and assets that were acquired after the marriage, which may consist of property and assets in their joint names or individual names. Marital debts typically work the same way.
Colorado is not a community property state, meaning the courts take the time to classify assets and financial obligations (such as student loan debts) as either marital or separate property. When dividing property, the Colorado courts consider multiple factors to determine the most equitable distribution of marital property between the two spouses. Unlike some states, Colorado does not take into account allegations of marital misconduct when making property distributions. The Court can consider “economic fault” but that is a topic for another day.
In Colorado, most property acquired after the marriage is presumed to be marital property, with certain exceptions. Assets acquired by a spouse by gift or devise (such as an inheritance) are not typically marital property, nor is property acquired in exchange for property received before the marriage. For example, if a spouse receives a house as an inheritance during the marriage, the house belongs to the spouse. Likewise, if the spouse sells the house he or she inherited, the proceeds of the sale may be considered separate property rather than marital property, depending on how the proceeds were treated, held and used.
In some situations, other property acquired during the marriage may be classified as separate property rather than marital. For example, the spouses may enter into an agreement clarifying that specific property belongs to one spouse or the other. Further, property acquired by a spouse after a decree of legal separation belongs to that spouse alone. Portions of property acquired before the marriage but that increase in value during the marriage may be considered marital property.
After the parties have identified what property is considered marital property, they determine the appropriate way to divide the parties’ assets and debts. In Colorado, the court uses the following factors to determine an equitable plan to distribute property:
A divorce attorney can help parties create equitable property distribution plans, taking into consideration the controlling law and the specific needs of the property. For legal help regarding dividing property and student loan debt in divorce, consider contacting Colorado Divorce Law Group.
Often, a spouse’s student loans are his or hers alone to pay, even if he or she later marries someone. That said, there are situations where a spouse may be forced to pay the other spouse’s student loan debts during a divorce. Whether this is the case depends on the applicable law in effect at that time and the specific circumstances at issue.
If the spouse acquired the student loans during the marriage, the other spouse may be responsible for paying the student loans if the spouse who acquired the loans cannot make the payments. Likewise, if the other spouse co-signed the loan, the student loan company may force him or her to be financially responsible for the loan under the terms of the contract. For example, if the spouse who took over the loans goes into default, the loan company may require the other spouse to begin making payments.
In most cases, a spouse’s student loan debt belongs to him or her if he or she took out the loans before the marriage. That said, if the other spouse co-signs the loan either before or during the marriage, he or she may be responsible for paying the loan if the spouse who owns the debt cannot pay.
The situation gets more complicated if the spouse with the student loan debt consolidates his or her debt and comingles premarital and marital debts together during this process. Both spouses may be responsible for paying the student loans in that case.
In limited situations, a spouse’s student loans may be forgiven. One option is to apply for the Public Service Loan Forgiveness program, administered by the Federal Student Aid division of the Department of Education. Under this program, individuals can seek forgiveness of their loans if they make a certain number of consecutive payments while working in the public sector. Other current qualifications for this program include working full time and participating in a qualified, income-driven repayment plan.
Navigating a divorce when one or both spouses have student loan debt can be confusing and challenging. By taking steps to properly understand the situation and set the right expectations, the spouses can help ease this burden and create an appropriate plan. If you have questions about student loan debt in divorce, consider contacting an experienced Colorado divorce attorney at Colorado Divorce Law Group by calling (720) 593-6442 and scheduling a consultation.