Am I Liable for My Spouse’s Business Debts?

Reviewed by

Chris Andersen

Reviewed by Chris Andersen

Chris became an Insolvency Practitioner in 2014 and is currently regulated by the IPA.

He is experienced in contentious insolvency with excellent analytical skills and strong knowledge of both general and technical insolvency matters.

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15th April 2024

It’s a common concern amongst both husbands and wives that a failing business could impact them personally.

In many cases, small business owners will have given personal guarantees to support business borrowings. Any guarantee given becomes problematic if the business fails and cannot pay its debts. This is the most common way in which a spouse of a business owner gets impacted, although it doesn’t generally mean a spouse is directly personally liable unless she or he has also given guarantees.

What can happen is that there will be an impact on assets, typically the family home, where the personal guarantee will then result in a claim against part or all of the equity in the property. In a worst-case scenario, this can mean the property must be sold.

If you are concerned about your business, your personal liability or how business problems might impact your spouse or family, we can help. Please do get in contact.

Am I Responsible for my Partner’s Business Debts?

Generally speaking, you are not liable for your spouse’s business debts in the UK unless you are a partner in the business or you have signed a personal guarantee for the debt.

If you are a partner in a business, you are jointly and severally liable for the business’s debts. This means that creditors can pursue you personally for the full amount of the debt, even if the business itself cannot pay.

If you have signed a personal guarantee for your spouse’s business debt, you are also personally liable for the debt. This means that creditors can pursue you personally for the debt, even if the business itself cannot pay and your spouse is unable to pay.

If you are not a partner in the business and you have not signed a personal guarantee for the debt, you are not liable for your spouse’s business debts.

Instances When You Could be Liable for Your Partner’s Debts

In general, you are not liable for your partner’s debts unless you have co-signed a loan or other credit agreement with them. However, there are some exceptions:

• Business partnerships: If you are in a business partnership with your spouse, you are jointly and severally liable for all debts incurred by the partnership. This means that creditors can pursue either or both of you for the full amount of the debt, even if only one partner was responsible for incurring it.
• Sole traders: If your partner is a sole trader, their business debts are considered personal debts. This means that creditors can go after their personal assets, including jointly owned assets, to satisfy the debt.
• Co-signed personal guarantees: If you co-sign a personal guarantee for your partner’s loan, you are liable for the debt if they fail to repay it. This means that creditors can pursue you for the full amount of the debt, even if you did not receive any of the loan proceeds.
• Joint accounts and mortgages: If you have a joint bank account or mortgage with your partner, you are both jointly and severally liable for the debt. This means that creditors can pursue either or both of you for the full amount of the debt, even if only one partner was responsible for incurring it.

It is important to note that joint and several liability means that creditors can pursue either or both partners for the full amount of the debt. This means that even if you were not responsible for incurring the debt, you could still be held liable for the full amount.

If you are concerned about your potential liability for your partner’s debts, it is important to talk to a financial advisor. They can help you understand your legal rights and options and develop a plan to protect your assets.