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How Are Student Loans Divided in a Texas Divorce?

What happens to student loans in a divorce?

Understanding the treatment of student loans during divorce is crucial, especially in Texas where they are common. In divorce proceedings, assets and debts are divided, based on whether they鈥檙e considered community property or the separate property of a spouse.

Note that various factors play a significant role in a court鈥檚 decision regarding student loan debt categorization. The spouse who did not incur the student loan debt may be concerned about the court deeming it as community debt. At this juncture, we should ask what constitutes a 鈥渟eparate property鈥 debt.聽

Separate Property

At this juncture, we should ask what constitutes a 鈥渟eparate property鈥 debt. A relevant question arises. Does separate property include debts or property acquired by a party before the parties got married?

This can either be by purchase, gift or inheritance. To prove that property is separate, someone must produce evidence that the Court considers to be clear and convincing.

Student Loan Debt

People take on student loan debt to cover the expenses associated with pursuing a degree of some sort, including school fees and related costs. This includes room and board, textbooks, food, etc.

If a person utilized their student loan for one of these items, then the odds are good that a judge would rule that debt to be separate and not community in nature.

This implies that the person who took out the loan in their name would bear the liability for the debt. If the loan benefited both spouses, a court may order both parties to share some degree of responsibility for repaying the debt.

An example of a use of that student loan that could stand to benefit both parties would be the purchase of a vehicle that both parties drove during the marriage. This 鈥渄ual鈥 use of the loan money could establish the debt as community rather than separate in nature.

Suppose that the student loan helped the wife in the marriage to earn a degree in a lucrative field, which in turn allowed her to earn a substantial income that has allowed the wife and her husband to enjoy a highly desirable lifestyle.

Even though the loan may be in the name of the wife only, a divorce court may find the husband partially responsible for the repayment of this debt since he experienced financial and material gains in his life.

Reimbursement

Another issue that has arisen in the context of divorces in Texas involves the reimbursement of student loan funds used to 鈥渂enefit鈥 the other spouse. Suppose a husband, while attending school, obtained a student loan in his name to cover expenses such as groceries and household items for his wife.

During their divorce proceedings years later, the husband may attempt to assert that he took out the student loan for his wife鈥檚 benefit, thus claiming entitlement to reimbursement for the funds he spent.

Section 3.042 of the Texas Family Code establishes that a person has the right to reimbursement when they use one estate鈥檚 funds to benefit another estate without receiving any corresponding benefit. The party asserting the right to reimbursement is responsible for demonstrating that they disbursed the funds to the other spouse and that these funds qualify for reimbursement.