If you are getting divorced in Nebraska, there are three main areas where student loans may be involved. Those three areas are: (1) when either party incurs student loans during the marriage; (2) when student loans that were obtained by either party prior to the marriage are paid off/down during the marriage; and (3) when the party paying child support desires to use their student loan payment as a deduction from their income in the child support calculation.
The first, and most common, situation involving student loans in divorce cases is when student loans are incurred during the marriage. Before examining this exact situation, it is important to understand how a Nebraska divorce court determines what should be included in the parties’ marital estate.
In determining the parties’ marital estate, the court will follow a three-step process: first, the parties’ assets and debts are classified as marital or nonmarital; second, marital assets and debts are valued; and third, the marital estate is then calculated and equitably divided.
Generally, all assets and debts received/incurred during the marriage are marital (there are several exceptions to this general rule), and the party wishing to have property classified as nonmarital (and therefore not included in the division of the marital estate) has the burden of proving said asset/debt is nonmarital. The appropriateness of the division of the net marital estate is fairness and reasonableness based upon the facts of the case, and the court has defined “equitable” as each spouse receiving one-third to one-half of the marital estate (though in many cases, an equal, 50/50 division usually is appropriate).
Nebraska courts have defined marital debt as an obligation incurred during the marriage for the joint benefit of the parties. Proving whether the debt was incurred during the marriage is straightforward — simply compare the date of the marriage to the date the loan was incurred, and if the debt postdates the marriage, it was incurred during the marriage. The area that is not straightforward is whether student loan debt incurred during the marriage is defined as “marital”.
Nebraska courts have dealt with this exact issue a handful of times and have reached different conclusions as to whether student loan debt incurred during the marriage. Without going into detail as to the facts and rulings of each case, the three general propositions of law that the Nebraska courts have reached on this issue are as follows:
- (1) Student loans incurred during the marriage ARE NOT marital debt, and therefore NOT part of the marital estate. This means that the party incurring the student loan debt remains solely responsible for the debt and the loans were not included in the equitable division of the marital estate. The main reasoning used when reaching this conclusion is that the party incurring the debt gets to take the benefit of the education received through the student loan debt with them after the divorce (better job, higher income, etc.), and therefore they should be solely responsible for the debt.
- (2) Student loans incurred during the marriage ARE marital debt, and therefore ARE part of the marital estate. This means that student loan debt incurred during the marriage should be included in the equitable division of the marital estate, and this essentially makes both parties responsible for the student loan debt. The main reasoning Nebraska courts have used when reaching this conclusion is that the student loans that were incurred during the marriage were for the joint benefit of both of the parties because the education that was received through incurring the debt financially benefitted the entire family and/or allowed career opportunities to be improved.
- (3) Student loans incurred during the marriage MAY BE marital debt, and therefore MAY BE part of the marital estate. This means that if you are attempting to convince the court that student loans incurred during the marriage should be included in the marital estate, you need to provide proof of how this debt benefitted both parties/the family, and if adequate proof is not provided, the student loan debt incurred during the marriage will be nonmarital, and therefore not included in the equitable division of the martial estate.
The main reason for Nebraska courts reaching these three different, and seemingly conflicting, conclusions is due to the different facts of each case that was before the district court at the original trial, as well as the adequacy of the evidence that was presented to the trial court.
If you have a Nebraska divorce that involves student loans, contact a Koenig Dunne divorce attorney today to discuss how your student loan debt may be examined by a Nebraska divorce court.