While it isn’t the most romantic discussion, debt is an important topic that needs to be addressed in a marriage. Whether it is before the wedding takes place, during the marriage, or in the context of a divorce, determining who is responsible for accrued debts is a fundamentally important issue that needs to be addressed candidly. This is especially true in the context of student loans.
The growing issue of student loan debt can weigh heavily on new marriages. A recent study by SunTrust revealed that 13% of younger marriages ended due to student loan debt. A unique aspect of student loan debt compared to other forms of debt is that, in most cases, it is present at the beginning of a relationship. As the relationship progresses, partners may decide that one will pay off his or her loans faster or bear more financial responsibility for the loans due to a disparity in income. If the relationship progresses to marriage, it is important for couples to discuss how they will handle these loans and payments.
In the context of a divorce, when the student loans are taken out plays a critical role in how a court may divide them. If loans are taken out before the parties are married, they are considered separate property and normally will not be considered divisible in a divorce. The spouse that took out the loan will ultimately be responsible for paying it. If the parties are still in school or still receiving the loan funds during the marriage, or, if one or both spouses take on a student loan during the marriage, the court may deem the debt marital or part marital and be able to apportion the debt between spouses. Under Virginia law, any debts that are incurred during the marriage are presumed to be marital regardless of which spouse took it out. However, if a party can prove that the debt was incurred for a non-marital purpose, the court may categorize the debt as separate or part separate, and not entirely divisible in a divorce.
Courts must examine the factors of Virginia Code §20-107.3 to determine whether student loans should be considered marital or separate. If for example, the parties used loan proceeds to pay rent, or buy groceries, a court may determine that those funds served the marriage and apportion part of the debt to the spouse who didn’t take on the loan. Courts have also analyzed whether the outcome of the loans, e.g. an advanced degree, benefited the marriage. If the spouse who used the loan received a degree and was then able to earn more money for the family, courts may again apportion part of the loan as a marital debt to be divided in equitable distribution or may order higher amounts of spousal or child support. The parties can always agree to distribute student loans in a separation agreement to avoid a court making the decision.
Parties can avoid these types of negotiations in a divorce by listing student loans or potential student loans as separate debts in a prenuptial agreement. By agreeing prior to the marriage that the loans are separate debts and that the individual parties listed in the loan contracts are responsible for the payment of the same, parties can protect themselves from responsibility for their spouse’s debt in the event of a divorce.
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