Community Funds Used for a Spouse’s Student Loans

Wife [W] and Husband [H] were married on August 27, 2011.  W filed for dissolution of marriage three and one-half years later.  They have one child.

The couple met in India.  At the time W was living with her parents in Michigan and attending medical school.  She was in her residency program making about $50.000 per year.  H was living and working in India.  After completing her residency, W began working as a full-fledged doctor making over $200,000 per year, continued to live with her parents and continued paying off her student loans (over $153,000).  H was still living and working in India

In 2013, W moved to California to work and shortly thereafter, H was able to obtain his visa and joined her. The couple lived frugally in a two-bedroom, two-bath apartment.  During this time, W provided her brother and parents with gifts of vacations to Las Vegas and India and repaying personal loans they had given her.   H did not work.

During the divorce procedure, H requested that he be reimbursed for his half of community interest in W’s payments of school loans and expenses, the personal loans from W’s parents to her before the marriage and for the gifts she gave to her parents and brother during the marriage.  He also requested W pay his legal fees for the divorce.

The trial court found that …”After weighing and balancing the facts in this case, the court finds the evidence established in this matter is a departure from the remedy envisioned by the legislature . . . this case does not present with a student spouse who has devoted substantially all their time and effort to an educational pursuit while the other spouse (Husband in this case) devotes substantially all their time and work earning income to support the expenses of the community and to support the education of the student spouse.” Rather, “during this marriage there was a strong understanding the parties would work diligently to avoid accumulated debt and the evidence establishes they engaged in the disciplined avoidance of accumulated debt.”  The court then awarded H $10,000 in attorney’s fees of the over $108,000 he incurred, but declined to reimburse him for W’s student loan payments and gifts to family members.

H appealed and the Appellate Court reversed the trial court’s decision:   “…When a spouse pays off student loans for education attained before the marriage with funds from salary earned during the marriage, does a trial court have discretion under Family Code section 2641 to deny reimbursement to the community because the nonstudent spouse did not contribute to the repayment of the loans or otherwise contribute to expenses during the marriage? In the published portion of this opinion, we conclude that section 2641 does not permit such discretion.”

Family Code section 2641 states that upon divorce, “[t]he community shall be reimbursed for community contributions to education,” including education loan repayments. (§ 2641, subdivision (b)(1), italics added.) But reduction or modification of reimbursement is allowed, “to the extent circumstances render such a disposition unjust … Exceptions rendering such disposition unjust include, but are not limited to: (1) where the community has ‘substantially benefited’ from the education; (2) where the education of one party is offset by the education of the other party, for which the community also contributed; and (3) where the party’s education substantially reduces that party’s need for support payments.”

The Appellate Court further stated, “The trial court relied on husband’s failure to contribute to wife’s education or loan repayments or family expenses, but nothing in the statute contemplates denying reimbursement to the community where the student spouse pays for her own education or where the nonstudent spouse did not somehow earn an entitlement to an equal share of the community. Indeed, the statute refers to ‘community contributions to education,’ and makes no reference to the source of the community contribution.”

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