While most people go into debt for different reasons, many younger adults carry a similar burden for the same reason — student loans for attending college. It is not just recent graduates who are trying to pay back those loans, either. Student loans can take several years to pay off, which means that a lot of Alabama couples are entering — and leaving — marriage with quite a bit of debt. Correctly handling that debt during divorce should be a priority.
Like with other assets, a couple should first determine whether a student loan is separate or marital property. So long as his or her ex did not co-sign, a student loan is usually separate property if one spouse borrowed the money before getting married. In a situation such as this, the person who originally took out the loan could expect to take this debt in a divorce.
A student loan is usually marital property when one spouse borrows the money during the marriage. While either person may end up taking on that debt during property division, it is important to consider who is legally responsible for payment. If only one person’s name is on the loan, his or her ex takes the debt in the divorce and then misses payments, the loan servicer could hold the original borrower responsible. Both spouses could be held responsible for missed payments when one spouse takes out the loan and the other co-signs.
There are different options for approaching student loans during divorce. For example, it is sometimes possible to refinance a loan which can lower monthly payments. It is a good idea to understand all of these options and how taking on certain debts might affect one’s financial situation, so people in Alabama should be sure to prepare as much as possible before property division.