Can My Spouse Be Liable for Debt When Filing Bankruptcy for My Business?

Small business owners who consider bankruptcy protection may wonder if creditors may decide to pursue a spouse for outstanding debt when the business seeks protection.  There are a few aspects to consider that may help determine if your spouse is also liable.  It depends on whether or not you reside in a community property or common law state and how your business is organized.

Either or both spouses may be responsible for outstanding business debt depending on the structure of your business.  If one spouse is considered the sole proprietor of the business or a general partner, it is likely they would be responsible for the debt on their own, similar to being liable for personal debts.  If general ownership of the business includes both spouses then each person would be responsible for outstanding debt.  As a limited partner for an LLC (limited liability company) or corporation, a spouse may not be responsible.

Each situation may vary as far as who is responsible since other factors need to considered, such as if the spouse cosigned for a loan or how business credit cards were used. In most situations couples who live in common law states may be responsible for their personal debt instead of debt that belongs to the other spouse.  In community property states, each spouse may be responsible for the debt since assets acquired during marriage are considered equally owned by both parties.  In this case a creditor may look to the spouse for satisfying outstanding debt.

Questions and concerns should be reviewed with a qualified Dallas bankruptcy attorney .