ABA Family Legal Guide

Family Law

Money Matters During Marriage

Doing Business Together

Is a wife or husband liable for the other's business debts?

Usually, no--unless the husband or wife had co-signed on the debt or they reside in a community property state. It is common, however, for institutions that lend money to small businesses to want personal guarantees of payment from the owner of the business, and not just from the business itself. In the event the debt is not paid, lenders would like as many pockets to reach into as possible. If the owner of the business owns a home, the lender may want to use the home as collateral for the business loan. That means that the spouse of the business owner may be asked to sign a paper allowing use of the home as collateral. Thus, the home could be lost if the business cannot pay off its debts. As long as a spouse does not co-sign for the business debts, the spouse will not normally be liable for business debts incurred by his or her mate.