Are Student Loans Community Property? Dividing Debt in Divorce

Student Loan Debt in DivorceAmericans owe nearly $1 trillion dollars in student loan debt. As of 2010, student loans have even surpassed credit card debt, according to the Federal Reserve Bank of New York. With student loan debt being so common, many people wonder how it is divided in a divorce, often where the debt is incurred largely by one spouse.

Arizona is a community property state. Community property is virtually all property acquired during the marriage, and also includes all debt. There are some exceptions, such as inheritance or property acquired before the marriage, so be sure to discuss all property with your attorney. When a couple divorces, the value of the community property is typically divided between the parties. This does not usually require that everything be liquidated – for examples, it often means one party takes a retirement account, while the other party takes equity in a home, if that would be equally valuable to each party.

The general rule is that student loan debt, if incurred during the marriage, is a community debt. Especially in cases where one spouse will receive most of the benefit of the education through increased income, this result would seem unfair. There are controlling Arizona cases however that provide some exceptions, depending on the situation. The court will look to factors such as the timing of the divorce relative to the schooling, whether the couple had an agreement, whether the couple has other substantial assets, whether the marital community benefited from the education, and the increase in income caused by the education. Because this depends on the facts of the case, there is no bright line for how the court may allocate the student loan debt. Therefore, it is best to contact an experienced divorce and family law attorney who can advocate the specifics of your case.

Attorney Profile: Scott R. Rowley, Divorce-Family Law Attorney, #DivorceLaw

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