Can My Spouse Be Held Liable For My Business Debts? Bankruptcy Information

Short Answer: If a debt is incurred during the course of marriage, it is presumed to be for the benefit of the community.  Same is true for income incurred during the course of marriage.  The other spouse can “rebut” the presumption,  if the spouses maintained  separate assets and financial accounts.  So, if you have a separate property business, separate bank accounts, didn’t commingle funds and not a signer on each other’s credit cards, car payments, house payments and things like that, then the spouse is not liable.  You would have to prove it in court, but, you can get there.

Assuming you “commingle” income, own property together and have joint bank accounts, the answer is very different.

When a debt goes unpaid, whether it’s a personal debt, business debt, or jointly owned debt, the creditor’s first concern is getting it current. That means you can be held liable for debt held by a spouse or family member if your name is on the account or you co-signed for the debt. This can be true even if the debt is wiped out by bankruptcy for the individual who incurred it.

However, Chapter 13 Bankruptcy protects co-debtors. A Chapter 7 bankruptcy does not.  That might be a great reason for the filing spouse to choose to file a Chapter 13 instead of a Chapter 7. That way, they can protect the non-filing spouse from creditor claims.

Washington State is community property state. If you cannot “rebut the presumption of community property” then any debt incurred by an individual following marriage is considered a joint debt, regardless of if you knew about it, approved it, or agreed to it.

This means that if your spouse starts a business and incurs debt after marriage, then folds the business and declares bankruptcy, the creditors can come after you for the debt. If you don’t seek bankruptcy protection, your wages could be garnished or the creditor could file a judgment against you for the debt.

There is an old saying: “You can divorce your spouse, but, you can’t divorce your creditors.”  If you are divorced or getting divorced, not much changes as long as the debt was incurred during your marriage. Even if the courts assign the debt to your spouse, if they fail to pay it, then creditors will turn to you, regardless of what the court says. At that point, it’s up to you to decide if it would be worth it to fight the creditor in court, pay the debt, or file for bankruptcy to avoid liability.

Over the past 23 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can stop your garnishment and change your monthly payments for all your combined unsecured debt, and if you have had more than $600 garnished within the last 90 days, we can get all of the money back in most cases. But you have to act quickly–call (253) 815-6940 x110 for your free consultation, or email us today. Evening and weekend appointments available.