Five Steps to Handling Your Business Debts During a Divorce

When a couple goes through a divorce, the last thing on their mind is typically how to handle their business debts. But it’s essential to address this issue head-on, as failing to do so can lead to serious financial consequences. Here are five steps to help you handle your business debts during and after divorce.

How to Handle Your Business Debts During Divorce


During a divorce, the division of assets and liabilities is crucial. This includes the division of business debts. In some cases, the parties might agree to divide the debts equally. But in other cases, the party who incurred the debt might be held liable for it.

Here are five tips for handling business debt during divorce:

1. Communicate with Your Partner About These Debts

It can be tempting to hide your debts from your spouse during divorce, especially if you’re worried about being stuck with them. But you must communicate openly and honestly about these debts, including how much each party is responsible for.

This will keep both spouses informed and help avoid any surprises when the time comes to divide these debts.

During communication, you can negotiate with your partner to divide these debts. Some couples might agree to split them 50/50, while others might decide to separate them according to who makes the most money or incurs more debt on a credit card.

2. Look into Consolidating Debts

If possible, look into consolidating your business debts before divorce proceedings begin. It can allow you to secure better interest rates and repayment terms. It can also make it easier for both parties to pay off the debt in full. But keep in mind that this option might not be feasible if you have a lot of business debt.

Requesting a credit line for your business can be another way to secure better terms. But before you do, closely examine the available terms and conditions, as this can potentially make things more complicated if you divorce down the road. One option is to ask your partner to cosign for this loan or line of credit. That way, if you decide to divorce, both parties will get an equal share of the amount owed.

3. Discuss Your Financial Situation with Your Divorce Attorney

Your divorce attorney can guide how to handle your business debts during divorce. They might recommend filing jointly for bankruptcy if the debt is more than you can afford. In some cases, it might be possible to have this debt discharged.

A divorce attorney can also advise you of your rights and responsibilities for debt incurred after divorce. For example, suppose you are required to pay child support or alimony. In that case, that might affect whether you are responsible for certain debts during the divorce proceedings.

Lastly, it helps if your attorney included a clause in the settlement agreement that clearly states your spouse is not responsible for these debts after divorce. With that, you cannot hold them liable.

4. Discuss Your Financial Situation with a Bankruptcy Attorney

Suppose it is impossible to consolidate your business debts or request better repayment terms. You might want to find out if filing for bankruptcy is the best option. It might allow you to discharge some of your unsecured debts and get a fresh start.

But before filing for bankruptcy, you should consult a bankruptcy attorney. They can review your situation and determine which option is best for you. However, the outcome will depend on the size of your debts, how much income you have available to make payments, and other factors.

5. Wait Out Your Unsecured Business Debts

If neither debt consolidation nor bankruptcy is possible, you might find yourself forced to wait out your unsecured business debts. This is usually not ideal, but it might be the only option you have.

During this time, make a list of all these debts and their terms. Keep track of when they come due and any interest rates or late fees added to them at that time.

This will help you avoid any surprises when the time comes to divide these debts. You might also consider transferring some of your business debt to a family member or friend. This might help you avoid the added expenses of late fees and interest on these debts.

Business debt in and of itself is not a significant issue when it comes to divorce. But it can complicate matters, especially if you can’t work together to find a solution that works for both of you. So be sure to review this issue with your legal team before proceeding with your divorce proceedings (or pre-divorce planning).

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