When a marriage is ending, unless there is a valid agreement between the parties, it is left up to the judge to determine the financial responsibilities of the parties in what they call in New York equitable distribution. In most cases, this requires the judge to figure out all of the marital assets as well as the marital debts. Student-loan debt is no exception; however, calculating which party is responsible for the payment of student-loan debt may be more complicated that it initially seems.
Student-Loan Debt Incurred Before the Marriage
As a general rule, student-loan debt that is incurred prior to the marriage is not considered a marital debt, and the party who took the loan out will be solely responsible for the payment of that debt. However, student-loan debt that is incurred during the marriage presents a more difficult situation and often requires the court to apply a multi-faceted test to determine which percentage of the debt, if any, is attributable to the spouse who did not incur the debt.
Student-Loan Debt Incurred During the Marriage
Under New York case law that was decided prior to the 2015-2016 updates to the New York Domestic Relations law student-loan debt may be considered marital debt that is subject to equitable distribution, depending on all of the surrounding circumstances. However, prior to the 2015-2016 update to the New York Domestic Relations law this used to also means that the degree or professional license that was obtained through the procurement of the debt may also be subject to equitable distribution. The updated Domestic Relations law, however, specifically changed the law to say that degrees were not subject to equitable distribution. In one of my next blogs we will examine whether the change to the New York Domestic Relations Law about degrees being subject to equitable distribution has altered the landscape about student loan debt.