Whether you are in the middle of a divorce or thinking of filing, you will have many considerations regarding dividing marital assets and marital debt. Often, an education is a person’s greatest asset as well as their greatest debt. How does California law treat education during a divorce?
Typical Division of Debts and Assets
California is a community property state, which usually means an even division of property upon divorce. If a couple does not have a prenuptial agreement, the two former spouses divide assets unless they reach a separate agreement regarding their division. The couple will divide debt incurred during the marriage at the time of the divorce.
In some cases, the divorcing couple will reach an agreement that each spouse will retain all assets obtained. Debts can be subject to such an agreement as well, with the primary debtor agreeing to take on the remainder of a debt they accrued in the name of both spouses, or the spouse with more assets agreeing to take on a debt they did not benefit from. However, student loans and education assets are subject to an entirely separate set of considerations.
Student Loans in California
The California Family Code states that courts will approach student loan debt separately from other marital debt. Any student loan debt remains the responsibility of the educated spouse. In other words, any student loan debt you owe at the time of your divorce remains solely your debt after the divorce. As stated, other assets and debts remain a part of the community – i.e., the partnership you formed with your spouse upon marriage.
What if your spouse helped pay for your education, or you used shared earnings to pay student loan debt? You may owe the community reimbursement of those funds, plus interest, especially if your own earnings increased because of your education. However, you need to ask a few other questions first.
Did your spouse also pay his or her own student loan debts from the community funds? In that case, reimbursement may not be necessary. Similarly, if you greatly increased your earning potential because of the education and contributed more significantly to the community funds, reimbursement is not likely necessary, especially if it has been ten years or more since the earnings increase. Another situation calling for reduced reimbursement happens if your increase in earnings has eliminated the need for spousal support.
Can You Divide Education Benefits?
Your education may have benefited the community funds upon completion, but your education itself is not community property. You are the one who earned and completed your degree, and receive any future benefits from it. Your spouse has no claim to a share of your earnings beyond potential reimbursement for any student loan payments made from the community funds. In other words, unless a court orders you to pay spousal support or reimburse the community for loan payments, you do not owe your spouse a share of your earnings or other benefits moving forward.
Are There Exceptions?
If the debtor spouse has no means of income or no earning potential due to other circumstances, the court could consider adding a portion of the student loan debt back to the community. In cases where student loan funds benefited the community in the form of childcare and other expenses, the two parties could reach an agreement that re-allocates student debt. However, California state law mandates that the debtor retains the student loan debt and these are exceptions to the rule.
If you are concerned about the division of education debts and benefits, speak with your attorney. It is likely that the debt will stay with the person who accrued it, but your attorney will be able to provide guidance based on your unique situation.