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How Are Student Loans Divided in a Texas Divorce?

Are student loans considered community property in divorce?

Understanding the treatment of student loans during divorce proceedings is a crucial aspect to consider. In the State of Texas, student loans are a type of debt that many individuals have. When it comes to divorce, both assets and debts are subject to division. This depends on whether they are classified as community property or the separate property of one spouse.

Note that various factors play a significant role in a court’s 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 “separate property” debt. 

Separate Property

At this juncture, we should ask what constitutes a “separate property” 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 “dual” 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 “benefit” 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’s 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’s 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.

In our hypothetical scenario, the husband would base his argument on the premise that the student loan was his separate debt and not part of the community estate.

Emphasizing the clear and convincing evidence standard, as discussed at the beginning of this essay, is essential. The husband must acknowledge that the court automatically assumes a debt incurred during the marriage to be part of the community estate unless compelling evidence indicates otherwise.

The husband’s act of obtaining the loan during the marriage and using the funds for shared expenses like groceries inherently qualifies as community debt, as both spouses stood to benefit from the purchased items. 

Furthermore, section 3.409 of the Texas Family Code explicitly specifies that a spouse cannot assert a reimbursement claim for money spent on their spouse’s living expenses.

Get it in Writing

How can spouses avoid potential disagreements regarding the treatment of student loan debt upon divorce?

Pre-Divorce Partition

For starters, it always pays to have a plan laid out and in writing before the heat of a divorce becomes too much for the parties to handle.

A pre-divorce partition of the debts associated with earning a college or graduate degree can go a long way towards deciding the issue before it even becomes an actual issue in a divorce case.

Mediation

Even if the parties haven’t resolved the issue before starting divorce proceedings, they don’t need to wait for a court to decide how to handle the student loan debt.

The parties can seek to attend a mediation session along with their attorneys in hopes of arriving at a pre-trial settlement.

Mediation stands as a cost effective alternative to leaving it up to the discretion of a judge and allows the parties themselves to find a creative solution to a sometimes difficult problem.

When it comes to advising clients on how to handle student loan debt, the Houston divorce attorneys with the Law Office of Bryan Fagan, PLLC are both knowledgeable of the laws in the State of Texas and cognizant of the particular financial situations of our clients. Having an advocate who can help guide you based on your own personal situation is incredibly important during a divorce.

For a free of charge consultation please contact our office today.

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Frequently Asked Questions

Is student loan debt split in a divorce in Texas?

In Texas, the categorization of student loan debt as community or separate property depends on the timing of the debt’s incurrence and its use during the marriage.

It’s essential to consult with a divorce attorney to understand how it may apply to your specific situation.

What happens to debt when you divorce in Texas?

Typically, Texas considers debts acquired during the marriage as community property, subject to division between spouses in a divorce. However, the specific division can vary based on several factors, including the nature of the debt and individual circumstances.

Am I responsible for my husband’s debts if we divorce in Texas?

In a Texas divorce, factors like the debt’s nature, the timing of its incurrence, and its classification as community or separate property influence who bears the responsibility. Consulting with a divorce attorney is crucial to understanding your specific obligations.

Does your spouse’s debt become yours in Texas?

In Texas, your spouse’s debt doesn’t automatically become yours upon divorce. Factors like the acquisition time, purpose, and legal classification as community or separate property determine the treatment of debt. Seeking legal counsel for personalized guidance is advisable.

Law Office of Bryan Fagan, PLLC | Houston, Texas Divorce Lawyers

The Law Office of Bryan Fagan, PLLC routinely handles matters that affect children and families. If you have questions regarding divorce, it’s important to speak with one of our Houston, TX Divorce Lawyers right away to protect your rights.

Our divorce lawyers in Houston TX are skilled at listening to your goals during this trying process and developing a strategy to meet those goals. Contact Law Office of Bryan Fagan, PLLC by calling (281) 810-9760 or submit your contact information in our online form. The Law Office of Bryan Fagan, PLLC handles Divorce cases in Houston, Texas, Cypress, Klein, Humble, Kingwood, Tomball, The Woodlands, the FM 1960 area, or surrounding areas, including Harris County, Montgomery County, Liberty County, Chambers County, Galveston County, Brazoria County, Fort Bend County and Waller County.

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