When couples divorce in Pennsylvania, their marital assets and property are divided via equitable distribution. This does not mean that everything is divided equally. Rather, how a court decides to divide the marital assets is based on several factors. See a discussion of these factors in our previous blog: Newtown Divorces, Equitable Distribution: How Courts Divide Marital Assets.
What many couples may not realize is that debts and liabilities are also divided in a divorce. Though the Pennsylvania Divorce Code requires marital assets to be divided, it does not specifically require courts to divide debts. However, liabilities are one of the equitable distribution factors courts consider for purposes of equitable distribution. In this article, we will look at a common situation when debt is divided between the parties.
Student Loans During Marriage
It is not uncommon for people to go back to school after they are married. Many people take out student loans. Although student loans are typically in the name of the party going back to school, and the Courts ordinarily find that the loans are the student’s sole responsibility in the divorce, the loans may still be considered as marital debt if there was a mutual benefit. When the couple divorces, the student loans may be allocated as part of equitable distribution. In such situations, the spouse that did not take out the loan may argue that the purpose of the student loan was for the benefit of the other spouse only. Therefore, they should not be responsible for the loan after the divorce. This is what happened to a divorcing couple in a 2000 Pennsylvania Superior Court case. See Hicks v. Kubit, 758 A.2d 202 (Pa. Super. 2000).
In Hicks, the wife incurred student loans during the marriage. When the couple was divorcing, the wife argued that the husband should be responsible for the loan as well because it was a marital debt incurred during the marriage and therefore should be divided evenly. The husband argued that the loan was for the wife’s education and her sole benefit for future earnings. Therefore, he should not have to pay for the loan after divorce.
The court held that although the student loan was marital debt because it was incurred during the marriage, that did not mean by default that the loan should be divided equally. The court held that since a major portion of the funds were used for the exclusive benefit of Wife by paying tuition and her education expenses to her sole benefit, she should solely be responsible for that major portion of the loans and interest. If a portion of the loan was used for the couple’s living expenses, then the husband would be responsible for part of that debt. However, the portion that paid for the wife’s tuition, school books and other school related expenses remained the wife’s sole responsibility.