Question #13: I am curious about what the typical division of student debt is upon divorce. As an example, I have a friend who’s husband will soon be finishing medical school and residency. She is seeking a divorce. Their total debt is on the order of $250,000, the vast majority of which is student debt. She has been working to pay family bills during the last two years he has been in school; prior to that, she was not working. She has also borrowed from her family to support them. They live in California. They have one child and no significant assets. Some of the money borrowed was for the direct costs of his education, and some of it was to support the family while he was in school. What can she expect in terms of division of this debt when they are divorced? Also, if he assumes the debt in the divorce settlement, are there steps she can take to remove herself from liability for the debts in case he defaults? Thanks

Answer: You do not indicate when these debts were incurred. If they were incurred during the course of the marriage, they would be marital debts to be paid from marital assets. Assuming the medical license and practice was acquired during the course of the marriage it would also be a marital asset, and approximately 1/2 of its estimated value would belong to your friend.
The loans your friend received from her relatives if properly documented as loans and not gifts ( preferably a promissory note executed by both husband and wife with a set interest amount and date upon which the debt is due or some other document evidencing the loan) are also marital debts to be paid out of marital property and both parties should be liable for.
If her husband assumes all of the debt, she can have the lender remove her from any existing debt obligations by preparing new loan documents with only his endorsement. If the lender refuses, she can get an indemnification from her husband in the event she is sued because he defaulted on the payments and can secure his obligation to indemnify by having him provide her with a lien on his practice and receivables.
Leonard M. Weiner Esq./Divorce Solutions