A couple reviewing finances and credit card statements

Am I Liable for my Wife or Husband’s Business Debt?

If your spouse has accrued considerable business debt, you may be asking yourself how this impacts you. In order to answer this question, it’s important to understand how business debt works in general and also how debt works in a marriage. Here’s what you need to know.


Business debt and personal liability

Incorporating a business limits the liability of the company’s founders. This means that a person can’t be held responsible for a company’s debt. However, this protection has exceptions. Banks will often ask for a personal guarantee on a loan, which makes the guarantor liable for the debt.


Poor use of company credit cards can also cause trouble because they’re usually tied to the business owner’s personal credit.


The bottom line is that people can find themselves liable for business debt. In particular, relying on amicable arrangements between family and friends when running a small business can easily result in particularly difficult debt management issues, especially in precarious and uncertain times.


Debt and Marriage

First off, you’re never responsible for the debt you haven’t signed for yourself. Getting married doesn’t make you responsible for any debts your partner had prior to the union and any debts they incur after marriage will be theirs to deal with, unless you also sign for it.


However, it’s common practice to have spouses act as co-signers or guarantors of each other’s debts, in which case you will be responsible for any money owed. These joint debts are often sizeable.


Note, also, that if your spouse isn’t operating in a limited liability structure, they’re personally responsible for their debts, and anything they co-own with you can be repossessed by creditors.



Protecting yourself from debt

Paying off business debt can be difficult. If you don’t want to be liable for any sum of money your spouse received as part of their business activities, your only real option is to avoid co-signing or guaranteeing loans. Consulting with financial professionals to understand what your risks and options are is also crucial. They can also help you and your spouse deal with any financial hurdles the business may face. 


Find Reliable Financial Counseling Near You Today!

D. & A. McLeod Company Ltd. provides a full range of personal and corporate services. If you’d like to discuss your situation and learn more about your options, contact us today to schedule a free consultation.