How Does Federal Student Loan Relief Affect Divorce?
This nation is undergoing an unprecedented crisis with the COVID-19 Pandemic. Congress has passed a number of historic relief packages to alleviate the financial distress from which millions of Americans are suffering.
On March 27, 2020, the CARES Act was signed into law, providing extraordinary aid to nearly all segments of the national economy. Although the relief provided by the CARES Act is indispensable to some during this difficult time, it can also complicate your dissolution of marriage action.
Federal Student Loan Forbearance & Divorce
One massive, yet often less publicized, component of the CARES Act is the automatic forbearance on all federal student loans.
From March 13 to September 30, 2020, all federal student loans are placed in administrative forbearance, regardless of repayment status, income range, or financial circumstances. This forbearance allows student loan holders to discontinue all payments until October 1, 2020 without penalties or accruing interest. Unlike other types of financial relief offered by the CARES Act, the federal student loan forbearance applies to all individuals alike, without limitation as to income or employment status. For many Americans with heavy student loan payments, the automatic six-month deferral of payments has substantially more value than the one-time stimulus check, which was also provided by the historic CARES Act.
However, despite the much-needed relief provided by the federal student loan forbearance, there may be important implications in a dissolution of marriage action. In all divorce cases, there is an Automatic Temporary Injunction that applies to both parties upon the filing and service of a Petition of Dissolution of Marriage. Among other provisions, the Automatic Temporary prohibits parties from making certain important financial changes. Courts generally expect parties to maintain the status quo of marital finances in order to remain compliant with the clear terms and intention of the Automatic Temporary Injunction. In determining the status quo, the Court generally looks to the regularly payment of recurring bills and monthly expenses which, for most parties with student loans, includes the monthly student loan payment.
As such, there may be significant case implications for parties who fail to make payments consistent with the status quo of the marriage. It is important to speak with your attorney prior to stopping payments on any debt or marital obligation, including those allowed by the CARES Act or other financial relief available during the covid-19 pandemic. Even in cases of extreme need, there may be options available for parties to inform the Court and seek relief from the status quo and other financial obligations.
Have questions about a potential case anywhere in Colorado? The Harris Law Firm is here to help. Contact us to speak with an attorney.