Tag Archives: marital debt

How Is Student Loan Debt Handled During Divorce?

DuPage County debt division attorneyIn 2017, the average student loan debt for graduates was over $37,000, which would amount to more than $45,000 when paid over 10 years with an average interest rate. This is a considerable amount of money. Graduate degrees are even more costly; the average student with a graduate degree has over $84,000 in debt, while the average medical school student has an astounding sum of $246,000 of debt. Many spouses may wonder what happens to this debt during divorce. This is a good question, because these debts can have a profound impact on a person’s life after finalizing the divorce process.

When the Loans Were Taken Out Before Marriage

If a student loan was procured before a couple was married, it will not be classified as marital property. Only marital property is divided during divorce. Non-marital property, such as bank accounts, real estate property, and debt, which was acquired before marriage remains the property and responsibility of that individual spouse. This means that if your wife took out $100,000 in law school loans before you were married, that debt will not become your responsibility after divorce.

Student Debt Acquired During Marriage

Everything changes when student loans are acquired during a marriage. However, simply because the debt is considered marital property does not mean that both spouses will be responsible for the debt. Many factors are taken into account when determining how to divide student debt, such as the following questions:

  • Which spouse profited from the education?

  • Did the non-debtor contribute to paying for the education or provide assistance in other ways, such as taking care of children while the debtor went to school?

  • How were the loans used? For example, did they cover housing as well as class fees?

  • What is the earning capacity of each spouse?

The spouse who went to school may end up being responsible for paying for all of their student loan debt after divorce based on how the above questions are answered. Depending on the circumstances and the decisions made during the divorce process, the other spouse may end up being responsible for paying off the debt as well.

A Wheaton Debt Division Attorney Can Help With Your Divorce

Distributing student loan debt during divorce can be exceedingly complicated. To ensure that your best interests are put at the forefront, you need an experienced DuPage County divorce attorney on your side. Call the Andrew Cores Family Law Group today at 630-871-1002 to schedule a free consultation.

Sources:

https://www.debt.org/students/

https://www.credible.com/blog/statistics/average-grad-school-debt-statistics/

https://www.cnbc.com/2019/05/20/how-much-the-average-student-loan-borrower-owes-when-they-graduate.html

 

Marital Debt and Bankruptcy

bankruptcy, Wheaton divorce attorneysIf you or your spouse ends up in the unenviable position of having to file for both bankruptcy and divorce, it is imperative that you both understand the laws surrounding marital debts and bankruptcy. Many couples make assumptions and then react strongly when their carefully constructed asset division proposal collapses on itself. By educating yourself, you and your spouse can work to avoid such a fate.

Bankruptcy First?

One of the biggest questions regarding asset division, but especially marital debt, is whether to file for bankruptcy before divorce or vice versa. The general rule is that it depends on each spouse’s individual finances, and which type of bankruptcy would be filed. However, in most cases, filing beforehand tends to streamline the divorce process, while filing afterward or concurrently can cause a divorce to drag on. This is especially true if you or your spouse would be filing a Chapter 7 bankruptcy, either jointly or individually. In a Chapter 7, all debts are eliminated or written off, as opposed to in other types of bankruptcy where restructuring is more common.

If one files for Chapter 7 bankruptcy before divorce, a significant amount of debt will likely be off the table, which means it does not have to be taken into account during property division in the divorce. This can cut down on time spent, and correspondingly, on attorney fees. However, some do choose to file for divorce first, either out of a misguided belief that they can then get out of paying spousal support, or because they want to safeguard a specific asset. This can have decidedly mixed outcomes.

Beware of Creditors

Perhaps the most egregious mistake that many couples make is believing that their divorce decree is binding on every actor that may have business with their marriage. The divorce decree does not bind your creditors. If your spouse is assigned responsibility for a debt, but defaults or files for bankruptcy (Chapter 7 or 13), that creditor may attempt to collect from you, regardless of whether or not your divorce decree absolved you of the responsibility to pay. Bankruptcy law requires that once a debtor has filed for bankruptcy, all creditors must cease all communication with that person. It says nothing about ceasing communication with a spouse or other co-signer.

Be advised, however, that barring certain very rare exceptions, bankruptcy law does not allow you to shake some creditors, if you are in the position to be on the proverbial hook: your spouse and/or children. 11 USC § 523 states specifically that spousal maintenance and child support are explicitly not dischargeable in bankruptcy unless it is absolutely impossible for the debtor to both pay and support themselves in a semi-decent style, and this is extremely difficult to prove. While bankruptcy will wipe out some of your marital debt, it will not clear the slate completely.

Need Help Understanding Bankruptcy & Divorce?

If you have been unfortunate enough to have to confront both bankruptcy and divorce at the same time, you need a knowledgeable attorney who will fight for you. Our passionate DuPage County divorce attorneys can help advise you as to the best path for you, your family and your finances. Contact our offices today to set up a free initial consultation.

 

Source:

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

How Do Illinois Courts Divide Marital Debt in a Divorce?

Illinois divorce attorney, Illinois family lawyer, Illinois marital debt laws,Marital assets and property are not the only things that are divided between divorcing spouses: the court must also divide any marital debts the couples may have at the time of the divorce. Like the division of assets, a court is also guided by principles of fairness and equity when dividing debts and liabilities. There is more to this inquiry than simply seeing which spouse’s name is on a particular bill: instead, a court must first determine what debts of the parties are marital debts and then divide them between the parties in a fair and equitable manner. So how exactly does a court do this?

The Starting Point: Is it a Marital Debt?

Marital debts are those obligations and liabilities that one or both spouses incurred during the course of the marriage for household or living expenses. This would include (for example) credit card balances reflecting purchases for food, clothing, and gas, loans or leases for cars, medical debts, and other similar obligations. The test used by the court is whether the obligation was incurred during the marriage and for the benefit of the couple: thus, a liability is generally not considered to be a marital debt if it:

  • Was incurred before the parties married; or
  • Was incurred solely for the benefit of one spouse and did not directly or indirectly benefit the other spouse.

Although the spouse who is listed as the responsible party for a particular debt may have limited relevance in determining whether that debt is marital debt or not, the fact that a particular debt is only in the name of one spouse is not determinative.

Dividing Marital Debts “Fairly and Equitably”

Like with assets and property, spouses can agree between themselves as to what debts and liabilities each of them will assume following the divorce. Absent such an agreement at the time of the divorce or a valid pre- or postnuptial agreement, the task of dividing marital debts will fall to the court. A court can consider a number of relevant factors in determining how to divide marital debt, including (but not limited to):

  • Which spouse bears responsibility for the debt (or if both spouses are listed as joint obligors on the debt);
  • Which spouse benefited more from the subject of the debt; and
  • The relative earning capacity of each of the spouses, the division of property, and other debts and liabilities assigned to each of the spouses.

Seek Competent Representation from an Experienced Divorce Attorney

The division of debt – like the division of marital property – can significantly impact your financial footing once the divorce is complete. A property division that includes too many debts set over to you and/or too few assets awarded to you can leave you in a precarious financial position. A skilled DuPage County divorce attorney can help ensure that you are not overly-burdened with debt that is not yours and that did not benefit you. Contact our Chicago, Wheaton, or Oswego office today for experienced and knowledgeable legal representation.

Source:

http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2102&ChapterID=59