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Community Property States
Californa is one of NINE states that have community property. In a community property state, all assets and debts acquired during the marriage is community debt, no matter who acquired it.
This means in divorce, these debts will be divided 50/50, and accounted for, no matter whose name the debt is in.
Exception: Student Loans
Unlike other debt acquired during marriage, student loans are not treated as community debt. Per Family Code 2641 (b) (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.”
The rationale is that the person who acquired the debt benefits from the education BEYOND the marriage, so it would not be fair to make it joint debt.
Of course, community property isn’t fair to begin with!
Exception to the Exception:
However, there are exceptions to the exception!
There are three primary exceptions to this general rule pursuant to California Family Code section 2641. Applying these may require the non-student spouse to be responsible for at least some of the debt post-marriage where:
Community Has Substantially Benefitted
“The community has substantially benefited from the education, training, or loan incurred for the education or training of the party” (note that courts presume that the community, as in the two spouses, did not “substantially benefit” from the education when the contributions were made less than ten years before the filing of a divorce action, and courts will presume that the community did benefit when more ten years have passed since the contributions were made; both presumptions can be rebutted, however);
Education received by party offset by education received by other for which community contributions made
“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.” (in other words, both parties received the benefit of an education paid for by community funds and/or debt); and
Education Enables Party To Engage in Gainful Employment that Reduces Need of Other party For Support
“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.” (meaning the court will take into consideration how spousal support numbers are affected by either party’s education in assigning the debt obligation).
As always, consult with a reputable family law attorney for specific legal advice.
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