Can My Spouse Be Held Liable for My Business Debts?

If you are married and filing for bankruptcy for a business, you might wonder if the bankruptcy will affect your spouse. The short answer: it is complicated.

You and your spouse could hold personal liability for business debts if your business structure does not offer limited liability. This usually is the case for sole proprietors of businesses or general partners. Debt liability for your spouse occurs the same way it would for personal debt: if you and your wife are general partners, both of you will be responsible for debts. If you are a limited partner, however, or your business is a corporation or limited liability company, your spouse is likely not responsible for debts.

If you and your spouse are cosigners for a business debt, you are responsible for paying that debt back, even if your business provides limited liability. Even if your spouse is not a cosigner, he or she can still be held liable depending on whether your state is a common law state or a community property state.

In common law states, you are usually not liable for a debt unless you signed the paperwork yourself, unless the business is jointly owned by you and your spouse as a general partnership. In community property states, spouses can actually have community property taken by creditors to pay back debts. If you are unsure whether your spouse could be held liable for your business debts during bankruptcy, contact a bankruptcy attorney.

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