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Student Loans and Community Property

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  • 06-04-2011, 10:07 AM
    EyesOpen
    Student Loans and Community Property
    My question involves divorce in the State of: OH

    My sister has residence in OH or TN, and her fiance has residence in either TN or GA. ( I could find details if pertinent.) They plan to reside in TN.

    The fiance has over 100K in student loans. My parents have paid for my sister's tuition. The wedding is to take place a semester or two before graduation.

    Of course, I am hoping for a lifetime of happiness for the two. However, I am curious about the worst-case scenario.

    When she marries him, will she then be jointly responsible for his debt? If they would divorce, would she be responsible for half of it? If they would purchase a house in both of their names and if they would go into default on the loans, would the house be in jeopardy? Could joint bank accounts be taken?

    I don't want to concentrate on the worst-case scenario, but I do want my sister to enter into this with her eyes wide open. Thanks for your input!!
  • 06-05-2011, 11:24 PM
    Mr. Knowitall
    Re: Student Loans and Community Property
    His premarital debt is his premarital debt. If he refinances the debt during the marriage, e.g., by paying it off with a home equity loan, it's conceivable that such an action will merge the debt into the marital estate; when and how that might happen depends upon state law. Depending upon the state, his creditors can pursue his separate assets, his income and share of the marital estate for his debts; some states are more restrictive in when a creditor can pursue one partner's share of marital assets, particularly the marital home, than others. Joint bank accounts are presumptively the property of any named account holder, so they're the easiest joint asset to pursue - the creditor can garnish the entire account balance and put the other account holder in the position of trying to prove their contribution and separate share in order to get the return of funds.
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