QUESTION: My spouse and I are divorcing but we owe about $100,000 in debt due to him starting a business that failed and I need to know if I’m 50% responsible for this debt?
Protect Your Future From Your Spouse’s Business Debt
When a Pennsylvania couple divorces, the couple’s marital property is divided between the spouses. Marital debts are also divided between the spouses. Since Pennsylvania is an equitable distribution state, the debts may not be divided equally. The spouse with the higher income may get a larger share of the marital debt.
What happens when one of the spouses owns a business? In Pennsylvania, a business is considered marital property if it was acquired during the marriage. A business that pre-existed the marriage may also be considered a marital asset if the spouse contributed to the success of the business. If the spouse was not actively involved in the business, it is still possible that any change in the business’s value during the marriage could be considered marital property.
If your spouse owns a business, it is very important that the business be valuated before a divorce agreement is made. This will determine the current value of the business as well as your contribution to the business’s success. Don’t take your spouse’s word for the business’s value. The valuation of a business is a complex procedure that is affected by laws governing particular business, partnerships, and owners’ agreements and should be conducted by an expert.
If your spouse’s business is marital property, you may want to exchange your right to the business for the marital home, cash or other assets. You will give up your rights to the business’s profits, but you will also be protected from any future business debt.
If your spouse’s business is already in debt, you will need a lawyer’s assistance to determine exactly how much of that debt is marital debt. Without an attorney, you could be held responsible for more than your fair share. To learn more about property distribution, business ownership and Pennsylvania divorces, contact Petrelli Previtera at 866-465-5395.