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The Treatment of HECS Debts in Family Law Matters

The Court will treat a HECS debt of a party in either one of two ways:

  1. The debt may be considered a personal liability and then would not included in the property settlement; or
  2. The debt is considered a joint liability and will be included in the property settlement.

The Court will consider the surrounding circumstances of how the HECS debt was incurred in order to decide whether it is just and equitable to consider the debt as a personal or joint liability.

In the matter of Lane & Owen [2010] FamCA 575, the Court treated the Wife’s HECS debt as a joint liability because the Husband’s studies were paid for using matrimonial funds throughout the course of the marriage.

In Berry & Berry [2010] FMCAfam 542, the Wife’s HECS debt was considered a joint liability because:

  1. The Wife undertook her studies by agreement with the Husband;
  2. The Wife obtained employment in her field of her studies immediately following the completion of her degree; and
  3. The Wife thereafter was the sole income earner for the family.

In Mullins & Birchmore [2014] FCCA 1297, the Court found that the Husband’s HECS debt was a personal liability. In this case, the Husband sought that the Wife pay 70% of his HECS debt which he alleged totalled $50,000 but actually totalled $26,406 at the time of the trial. During the marriage, the parties had paid a HECs debt that the Husband had previously incurred totalling $11,692 with joint matrimonial funds.

The Court found that the Husband had been the beneficiary of his studies. The Wife had worked to support the Husband and the children while he studied, and the family only benefitted from his increased income for 2.5 years. The Court also took into consideration the fact that the Wife had already contributed to paying off the Husband’s previous HECS debt.

The Court noted the fact that the Husband’s evidence was that he intended to cease working in the field in which he had studied and was on the cusp of commencing a further 4 to 5 year period of study. The Court noted that the repayments of HECS debts are contingent upon the receipt of income. The Court  stated that the Husband is electing not to exercise his earning capacity and that in these circumstances it would be unjust and unequitable to treat the debt as a joint liability.

By Nicholes Family Lawyers

 

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