Defining Marital Property
In Tennessee, marital property includes assets and debts acquired during the marriage. This encompasses everything from real estate and vehicles to financial accounts and debts, including student loans.
Tennessee is an equitable distribution of property state. This means a divorce court separates all marital property and debts in what they believe to be most fair to each spouse. A court will usually award student loan debts to the party that took them out in the first place.
However, sometimes, a court uses the following factors to determine if student loan debts are marital or separate property:
When the Spouse Took Out the Loan
If one spouse took out a loan before the marriage, the court will most likely determine that spouse to be solely responsible for the loan. This is because the spouse was a single student at the time and had no financial ties to their future spouse.
If student loans were taken out during the marriage, they are generally considered marital debt. This includes any loans used to pay for education while both spouses were married.
If the Other Spouse Benefitted from the Loan
A court may consider student loan debt the responsibility of both parties if there is proof they benefitted from the debt in some way. For example, if the use of the student loan was to pay jointly held utility or housing bills in addition to school funds, the court could consider the debt marital property.
In addition, if the degree helped the student earn a large income, a court could argue that it increased the standard of living of both parties and therefore is a marital debt.
The Earning Capacity of Each Spouse
If one spouse earns much more than the other, it could affect how a post-divorce budget is divided between the spouses. For example, if one spouse has student loan debt but can’t afford to pay it on their own, and the other has enough income to cover a majority of the payments, a court may divide the debt in such a way that the higher-earning spouse pays more of the debt.
Equitable Distribution of Student Loan Debt
When dividing student loan debt during divorce, the court will consider various factors to achieve an equitable distribution. These may include:
- The Length of the Marriage: Longer marriages may lead to more equal sharing of debts, including student loans, particularly if the education has contributed to shared financial benefits.
- Financial Contributions: The court will evaluate each spouse’s contributions to the household and how the student loans impacted the family’s financial situation.
- Future Earning Potential: If one spouse’s education significantly enhances their earning capacity, the court may take this into account when determining how to distribute the student loan debt.
- Ability to Pay: The financial stability and earning potential of both spouses are critical considerations. The court aims to avoid placing an undue financial burden on one party.
Clarifying Debt Ownership
If you and your partner disagree over who should pay certain debts after your divorce, we can help. Our property division specialists will help you fairly distribute your assets and debts.
To schedule your consultation with our Chattanooga family law advocates, call Conner & Roberts, PLLC at (423) 299-4489 or contact us online.