As students take on more debt than ever before, divorcing couples must take student loans into consideration. In Tennessee, courts strive to fairly and equitably distribute debt and property between divorcing spouses and will determine how to divide debt on a case-by-case basis. Student loan debt may also impact other property division and spousal support, depending on the circumstances of your case.
Tennessee is an equitable distribution state, meaning the courts separate marital property and debt according to what the court considers is fair and equitable to both spouses. The court has a lot of discretion to determine what is equitable, and debt distribution is highly dependent on the specific facts of each case. When it comes to dividing debt, the court will generally look at the purpose of the debt, which spouse took on the debt, which spouse benefited from taking on the debt and which spouse is financially able to repay it.
Tennessee courts will only divide marital property, while separate property remains with the person who owns the property or debt and will not be impacted by the divorce. Generally, any assets or debt acquired during the marriage and up to the date spouses separate is considered marital property. If the debt was acquired before the couple got married, it is usually considered separate property and is not impacted by the divorce.
Student Loan Debt
Whether or not a Tennessee court will treat student loans as marital or separate debt depends on when the spouse took on the debt and whether the other spouse benefited from taking on the loan. Generally, if one spouse took on all his student loans before he got married, the loans are considered separate debt. If the student gets married and then takes out more loans, the court may consider other equitable factors to determine whether it is marital debt, such as the ability of the student to repay the loans as compared to the other spouse. Even if the entire student loan debt was taken on during the marriage, the court will only consider it to be marital debt if the spouse can show that the debt benefited both spouses. If both spouses lived off the student loans or if the education acquired was used to better the lives of both spouses, it likely will be considered marital debt.
Property Division and Spousal Support
When the court orders that one spouse is responsible for paying off student loans, it may have an impact on other property division or spousal support. If one spouse used marital property to pay off part of her student loan debt during the marriage, the court may give that spouse a less favorable property award to compensate the other spouse for the loan payments. In determining spousal support, the court may consider all financial circumstances of each spouse, including debt obligations. As a result, if a spouse can demonstrate that she is unable to reasonably support herself, in part because of student loan payments, she may receive spousal support from the other spouse.