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26 Jul. 2016

You Don't Have To Get Stuck With Your Spouse's Education Loans In A Divorce

Posted By The Buncher Law Corporation

There is a reimbursement claim that is often missed by family law attorneys because it is an exception to community property principles. The basic rule of community property is that all debts or assets acquired during marriage belong to both spouses. Such community debts and assets are equally divided.

However, this rule does not apply to loans and expenses incurred or paid during a marriage for a spouse's education. A spouse may have a right to be reimbursed for half the costs spent during the marriage for their partner's education, plus interest at the rate of 10%. The statutes that address this are in the California Family Code, sections 2627 and 2641.

First, an outstanding loan incurred during marriage for a spouse’s education or training must be assigned for payment to the spouse that received the education. It is disregarded in effecting an equal division of community property. However, the court has the authority to reduce or modify this assignment to prevent the assignment from being "unjust."

Second, community contributions made during marriage to the education of a spouse that substantially enhances his or her earning capacity, shall be reimbursed to the community at the "legal rate of interest" - 10% in California - unless the court deems that settlement unjust.

In other words, if earnings during marriage are used to pay Spouse A's education loans and expenses, at the time of dissolution, Spouse A must reimburse Spouse B for half those payments plus 10% interest.

Under what circumstances would a judge find that arrangement to be unjust?

The court can consider a number of factors, including whether the community has already substantially benefitted from the education's costs. This is presumed to have occurred if the loans and payments took place more than 10 years prior to the commencement of dissolution proceedings.

Other considerations include whether Spouse B also had education loans and expenses paid during the marriage, or if Spouse A's education loans substantially reduced the need for spousal support.

If you have questions regarding property division or the divorce process, our lawyers at The Buncher Law Corporation are available to discuss your case and concerns during a personalized consultation. Contact us today to get started! We serve clients throughout Orange County from our Irvine office.

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