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Divorcing with a co-signed student loan

On Behalf of | Jun 17, 2021 | Divorce

When parting ways, many couples are concerned with splitting shared assets. But what about liabilities or debts? Student loans are often one of the biggest debt loads held by individuals in North Carolina, and they often come into play in a divorce. The decision about who is responsible for such debts can depend on the circumstances of the loan, including when it was taken out, the names on the documents and who was paying for it during the marriage.

Names on a document are an important starting point

Those who have their names on a spouse’s student loan applications can find themselves in a bind. Even if an ex has agreed to pay these back, the co-signatory is still responsible to pay if his or her former partner falls short. There are some remedies for this that can be sought through family courts; however, loans that were taken out during the marriage as a joint liability are difficult to break free from.

The limitations of a court decision

Even though a court may rule that the primary borrower of the student loan is liable to pay the outstanding sum, the contract with the lender still has both names. The co-signatory, from the lender’s perspective, is not contingent on marital status. This means that, while a court could confirm that one party is solely or mostly responsible to pay the amount back, failure to pay will impact the credit scores of both parties.

Best practices for dealing with shared student loans after divorce

First, it is important to talk with a lawyer about how North Carolina family law approaches student loans with co-signatories. In many cases, it might be difficult to fight liability for debt taken out during the marriage. A lawyer is best positioned to look into the specifics of one’s debts and see what options are available. If it is determined that the other spouse is wholly responsible for the debt, it is still a very good idea to monitor repayments and ensure he or she follows through to prevent negative outcomes for both credit scores.