When going through a divorce in Arizona, student loans are a particular area of concern. These debts are typically owned by one person before marriage, so it’s often the one who took out the loans who is responsible for the debt following divorce. The situation becomes more complex when loans are taken out during marriage, and if you’re in this situation, reach out to us and we can help make things clear for you.
The law in Arizona dictates that it’s down to the discretion of judges what happens to student loans, meaning that judges divide the debts inconsistently. In making decisions, courts consider the following:
- Debts acquired during marriage are presumed to be community property and are to be divided fairly. Fair division typically means dividing debts evenly, but a different outcome may be required to achieve fairness.
- If any agreements were made between spouses during marriage about student loans, these will be considered.
- If student loans were intended to benefit both parties, equal division of debt is presumed to be fair.
- Student loans are typically considered community obligations if the money was used to pay living expenses for both parties while one was in education.
- Bankruptcy does not relieve debtors from student loans.
- All presumptions must be rebutted with evidence.
These cases can be difficult because usually one spouse—the one who took out the loan—benefits disproportionately from the education. Courts consider the individual circumstances of each case and make decisions inconsistently with regards to student loans. Sometimes the spouse who withdrew the loan is made liable, sometimes liability is split evenly and sometimes the split is unequal. The judge may decide to split debts evenly if the couple has benefitted from one spouse achieving a higher income after graduation.
If one spouse will benefit more than the other post-divorce, all of the debt may be assigned to them. Courts attempt to do what is fair in every instance, so while there is no one way that courts divide these debts, they always aim to do it equitably. As fairness is subjective, what each judge determines to be fair is different, but fairness is typically evaluated based on the aforementioned points. In terms of what this means for you, your divorce and your student loan, it means that there are risks for both you and your spouse, regardless of who drew out the loan.
If possible, attempt to come to an agreement with your spouse about who will assume responsibility for the student loan prior to going to court. This is, of course, difficult for some people, and you can view this useful resource to find advice on facilitating such a discussion. But, because both parties carry some risk going into court, it is in the interest of both parties to come to an agreement to minimize the risk for each party.