Could My Spouse Be Liable for My Business Debts?Dallas Legal News
Many aspects of debt and spousal liability depend upon the debts that have been incurred and how your business is specifically organized. If you are considering business bankruptcy, you might have concerns about the role that your spouse will play in your bankruptcy process and the impact that it could leave on both of your lives. Today we want to look at a few aspects so that you know where you stand as you move forward with this process and both of you decide if this is a good idea for you.
When a Spouse Might Be Liable for Business Debts
No Limited Liability: If your business does not offer limited liability, then this means that your spouse would also be liable for your business debts just as they would for any personal debts you share with one another. If the company was formed as an LLC, however, there is a good chance that a spouse will not be on-the-hook when it comes to business debts.
Cosignature on Business Debt: Perhaps your spouse cosigned the loan documents that state that they will help you pay back any debts if you or the company are no longer able to do this. This is especially true in community property states.
How Community Property Works
Texas is a community property state, which means that if you live there are you are considering going through the business bankruptcy process, there are some things that you should understand. Community property, in general, states that all assets purchased or acquired by a couple during their marriage are owned in equal measures by both of them. It does not matter how the asset is titled, this remains the same across the board.
If you live in a community property state like Texas, this means that you have to be careful because most debts incurred during the marriage are deemed ‘community debts,’ which means that both spouses could fall liable. If a spouse fails to pay a debt for any reason, creditors might come after the other spouse as a way to fulfill the debt. This can be a scary aspect to discover when you are facing the reality of bankruptcy along your spouse’s side.
For Those Dealing with Bankruptcy and Divorce
Divorce and bankruptcy is another marriage-related factor that we must take a closer look at. Any attorney will likely tell you that divorce and bankruptcy should not overlap at the same time because it can turn into an overly complicated matter. Part of the divorce process is working together to split up assets. If an automatic stay is given to creditors because somebody filed for business bankruptcy, it is impossible for the courts to divide assets, which means that your divorce process will take a longer amount of time than expected. This is why it is a good idea to never let the two coincide, and allow your business bankruptcy to play out if this is the option that works best for both of you.
Speaking with an Experienced Texas Bankruptcy Attorney
At MJ Watson & Associates, our experienced bankruptcy attorneys are fully skilled at helping many clients move forward with one of the most difficult aspects of their life. No matter what business bankruptcy process you choose to endure, whether you are looking at Chapter 7 or Chapter 11 bankruptcy, our skilled bankruptcy attorneys have helped many clients and are looking to help you achieve the best outcome in your case. Please contact us at 214-965-8240 for more information.