So, my ex's student loans are now community property?
At the time of marriage, your spouse had $30,000 in student loans. The general rule is that the student loan will always be the separate property debt of your spouse, even during a divorce.
However, at some point in your marriage, you both decided to refinance the student loan for a lower interest rate in both of your names. Is it your obligation to continue paying on the loan at the time divorce?
|Family Code Section 2641 helps answers this question for us:
(a) “Community contributions to education or training” as used in this section means payments made with community or quasi-community property for education or training or for the repayment of a loan incurred for education or training, whether the payments were made while the parties were resident in this state or resident outside this state.
(b) Subject to the limitations provided in this section, upon dissolution of marriage or legal separation of the parties:
(1) The community shall be reimbursed for community contributions to education or training of a party that substantially enhances the earning capacity of the party. The amount reimbursed shall be with interest at the legal rate, accruing from the end of the calendar year in which the contributions were made.
(2) A loan incurred during marriage for the education or training of a party shall not be included among the liabilities of the community for the purpose of division pursuant to this division but shall be assigned for payment by the party.
(c) The reimbursement and assignment required by this section shall be reduced or modified to the extent circumstances render such a disposition unjust, including, but not limited to, any of the following:
(1) The community has substantially benefited from the education, training, or loan incurred for the education or training of the party. There is a rebuttable presumption, affecting the burden of proof, that the community has not substantially benefited from community contributions to the education or training made less than 10 years before the commencement of the proceeding, and that the community has substantially benefited from community contributions to the education or training made more than 10 years before the commencement of the proceeding.
(2) The education or training received by the party is offset by the education or training received by the other party for which community contributions have been made.
(3) The education or training enables the party receiving the education or training to engage in gainful employment that substantially reduces the need of the party for support that would otherwise be required.
(d) Reimbursement for community contributions and assignment of loans pursuant to this section is the exclusive remedy of the community or a party for the education or training and any resulting enhancement of the earning capacity of a party. However, nothing in this subdivision limits consideration of the effect of the education, training, or enhancement, or the amount reimbursed pursuant to this section, on the circumstances of the parties for the purpose of an order for support pursuant to Section 4320.
(e) This section is subject to an express written agreement of the parties to the contrary.
The quick answer is: Yes, because you refinanced the loan in BOTH of your names! You effectively agreed to turn it into a community debt. But, what if the marriage was less than 10 years?
If the marriage was less than 10 years and your marriage didn't benefit from the student loans, then the community may be reimbursed for repayment on the loans at the legal rate of 10% annual interest.
This is tricky because you would have the burden of proof to show the Court that the marriage didn't benefit from repayment on the student loans. For example, the spouse does not work in that profession and earning capacity didn't substantially improve.
It is probably best to enter into a settlement agreement at that point in hopes of avoiding paying half of the refinanced student loan. Hire a competent family law attorney to help you negotiate this community debt!
Call #yourlegalwarrior TODAY at 858.761.8661!
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