Property division proceedings can be the most complicated aspect of a divorce. Spouses have to put together inventories of their assets and debts. They have to negotiate with one another to divide their resources and financial obligations.
If divorcing spouses cannot reach a settlement, then they may have to take the matter to court. Family law judges have the legal authority to divide property, assign responsibility for debts and even order the sale of marital assets. Assets with a greater overall value can often become sources of complication during the divorce. Spouses are likely to fight over a small business, shared real estate or retirement savings.
The same is true of debts. Large financial obligations can lead to spouses disagreeing with one another about the best way to address their shared debts. Most couples recognize that they may have to divide joint credit cards and other co-signed debts. Some debts fall into a gray area where they may not necessarily be the direct responsibility of both spouses. Do student loans owed by either spouse factor into property division proceedings during a divorce?
Timing is everything when dividing debt
Many people rush to the conclusion that student loans are the separate financial responsibility of the spouse who took out the loan. That is generally the case in scenarios where spouses already had student debt at the time of their marriage.
However, debts taken on during the marital relationship are typically part of the marital estate. Even financial obligations owed solely by one spouse can factor into the property division process. If either spouse took out student loans during the marriage, those loans are likely subject to division as part of the marital estate.
Sometimes, the courts might order the liquidation of marital assets to cover marital debts. They could also make one spouse responsible for more shared debts in consideration of the student loan debts of one spouse.
Even the allocation of property can play a role in offsetting marital debts. Someone who carries more of the debt after the divorce might also receive more of the marital estate. It can be very difficult to predict exactly how a judge might address large financial obligations, like student loans, during litigated property division proceedings.
Spouses who understand which debts are part of the marital estate and which are not may have an easier time reaching an amicable property division settlement. Looking over financial records, including when debts originated, can help people prepare for complex financial negotiations in an upcoming divorce.