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Michigan Family Law Blog

Tuesday, December 18, 2018

What Happens to Student Loans In A Divorce?

What Happens To Student Loans In A Divorce?

Almost every divorce case requires dividing some form of debt between the spouses.  There are secured debts, like a mortgage or vehicle loan where the loan is secured by some property that the lender can repossess.  Then there are unsecured debts such as credit card debts or medical bills. 

When it comes to secured debts, the debt usually goes to whomever is awarded that property and the value of the property is reduced by the debt.  For instance, if a car is awarded to a party, that party is responsible for paying the loan but the value of the car is reduced when it comes to determining the division of property.  With a home, the parties either sell the home, pay the debt out of the proceeds and divide the remainder (or remain equally responsible for any deficiency) or the party awarded the home is responsible for paying the loan (often by refinancing to remove the other person's name from the mortgage) and the value of the home is reduced by the mortgage balance when dividing the property.  Unsecured debts are usually divided equally between the parties regardless of which party incurred the debt absent certain circumstances which would justify an unequal division of the same.  Some examples which might justify an unequal division are use of the line of credit to pursue an affair or to accrue unreasonable gambling debts.

Student loans are a little different and more personal to the person that took out the loan, received the education or obtained a degree or certificate.  So in most cases, the court will order that the person who took out the loan and received the benefits from it will be one hundred (100%) percent liable for that loan and it will not be offset against other property.  This makes some sense in that one person takes the education and value of having the degree with her or him, but it is virtually impossible in a divorce to determine the actual value of the education and somehow divide that value between the parties.  There are some exceptions to this rule however.  One exception is where a party takes out additional student loans but then uses those funds for other "marital purposes", such as improvements to a home or taking a family vacation.  In such cases, if a party is able to prove that the funds were not used for educational purposes but rather "marital purposes", then there is legal precedent in Michigan allow a court to order both parties to be equally responsible for repayment of the student loan.

There are many exceptions to the overriding legal principles in family law and one must have an attorney that is very well-versed in divorce law to take advantage of such exceptions when they apply to your case.  If you have questions regarding divorce, separation or another area of family law, please contact my assistant Cathy at (248) 608-4123 to schedule an appointment or contact us through this web site. 

  

 


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