University debt and equitable distribution | Fox Rothschild LLP

When couples decide to end a marriage, the process involves dividing the good (the assets) from the bad (the liabilities) and the ugly (the liabilities that exceed the assets). Hearings officers we spoke with report that they see more cases where controversies are ugly. Ten years ago, the battles usually involved over-indebted houses that were “upside down” (debt far exceeding market value). The economic growth of the past decade has solved many of these problems, but for the last generation we have seen relentless growth in student debt.

Student loan debt presents its own peculiar problems. For the most part, like secured debt (eg, mortgage debt), it really resists discharge in bankruptcy. We have learned in recent years that some dumps have been obtained, however, the general rule seems to remain that this debt can be structured, but it does not go away.

Most of the students who incur these debts are not married. But they have parents who are, and these parents often engage either as primary borrowers (the parents took out the loan) or as guarantors (the child is primarily responsible but if the The child does not pay the lender has recourse against the parents who guaranteed the loan (s)). We have found that most adults sign loan documents without a clear understanding of who is obligated and how. After all, education is a necessity, right? So you do whatever it takes.

Once the documents are signed, it is difficult to get out of the swamp of student debt. The three boats released are named: Restructuring, Tolerance and Discharge, the third boat being the most difficult to find. Nonetheless, with 45 million Americans occupying part of the student debt swamp, people are looking for a way out. The smartest people assess the swamp before entering it.

Below are some resources that can help you. Be aware that divorce courts do not have the jurisdiction to do much more than apportion the debt presented to them. Also, if you are a co-borrower or co-guarantor of a debt, the fact that the divorce court assigned the debt to your spouse on an equitable basis does not affect the possibility that the lender can sue you. So navigate carefully if you are about to enter the swamp and take a look at these resources. is a creation of the US Department of Education. It contains both information and a guide to managing loans, including a loan simulator that allows the borrower to “try out” different payment plans.


National Federation of Credit Counseling

Financial Advisory Association of America

The Institute of Student Loan Counselors or TISLA

Be careful when browsing these sites. Some are strongly geared towards managing your money as a way to better allocate funds for student debt reduction. It can be a useful tool, but it doesn’t change the payment plan. Also be aware that there are many sites devoted to public service loan forgiveness, which only applies to people in some form of public service, and even these applicants encounter some pretty difficult channels of forgiveness eligibility.

There are lawyers and paid services that also provide advice. Just make sure who you are dealing with. It’s not something the typical lawyer can handle. There is nothing wrong with asking for references. We have seen happy results in the area of ​​forbearance (paying less now based on low income). But, after you’ve cruised the swamp, you want to make sure that you don’t go any deeper with a service or lawyer steer you wrong.

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