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Will student loans affect property division during a divorce?

On Behalf of | Mar 24, 2023 | Family Law |

Every divorcing couple in North Carolina needs to reach an agreement about property division matters or have a judge make those choices. If a divorce case goes to trial, a judge will apply the state’s equitable distribution statute when dividing marital property and debts.

Many spouses can’t even agree on what property should be classified as part of their marital estate and what is separate property. Various assets and financial obligations can be major points of contention in North Carolina divorces. For example, student loans are often worth tens of thousands of dollars and can be a source of intense financial pressure on a married couple. What happens with student loans during the property division process of a North Carolina divorce?

Sometimes loans are marital property

Although it is an answer that many people wish they hadn’t heard, the unfortunate truth is that what determines if they have to help repay the debt or not typically depends on when someone took on a student loan. Those who had pre-existing student loans before the marriage will have to pay those obligations back on their own.

Someone who would sign a marital agreement addressing student loan debt and agreeing to keep it separate would also likely not have a claim to request support for their student loan obligations in a divorce. However, if the student loans originated during the marriage and if someone took them on with the intention of supporting the family after obtaining a degree, then those debts may be part of the marital estate and therefore an important factor in the property division process.

While a judge may not demand that each spouse assume 50% responsibility for the student loan debts, they can still order the married couple to share those obligations, which means the spouse who didn’t attend school will help pay for the other’s education.

Negotiated settlements help people to avoid property division surprises

Whenever spouses successfully negotiate their own property division arrangements, they eliminate the risk of an untenable outcome in family court. Those who understand what property and debts are in play during divorce negotiations will have an easier time setting thoughtful priorities and influencing the outcome of their situation.

With that said, the negotiations process is rarely easy or straightforward. As a result, getting help with the analysis of one’s marital estate can benefit those who are expecting to file for divorce soon in North Carolina.