One of the most complicated aspects of many New York divorces is the process of dividing up a couple’s joint property. While many believe that this entails only the division of bank accounts, real estate, retirement savings and other assets, there is one additional aspect of property division that can be very challenging: dividing up debt. More couples are struggling with this task today, after the economic recession and resulting financial rollercoaster of the past few years.
Student loans are one of the more common forms of debt affecting residents of Buffalo and most other parts of the country. According to the Institute for College Access and Success, students that received bachelor’s degrees in 2012 (and that took out student loans to finance their education) had an average of nearly $30,000 in outstanding student loans at graduation. As such, many graduates are marrying – and divorcing – with much of that debt left to pay off.
Much like assets and property, debt division is dictated by the family laws of the state in which the divorce is taking place. In general, though, student debt that is incurred prior to a marriage is considered separate property, and remains the responsibility of the individual spouse that took the loans out. However, family court judges usually have discretion to order one spouse to help pay for the other’s loans, especially if there is a significant income disparity between the two.
But what happens when student loans are taken out after a couple is married? We will explore that issue in our next family law blog post.
Source: The Wall Street Journal, “Who is Responsible for the Student Loans After Divorce?” Charlie Wells, April 13, 2014