Creditors after Spouse - What Liability do I have?

[mibella1230]

What is the name of your state (only U.S. law)? Minnesota
My spouse ownes sole propritorship Snow Removal business. He racked up $80,000 of credit card debt in his/company name. (my name isn't tied to any of it.)
He put his business assets into a seperate LLC that he "owns". (4 trucks, plows, salt spreaders, etc.)
Can the creditors go after the assets in the LLC?


My credit is perfect. We have seperate banking accounts and I have saved enough money to purchase a home. I don't want his creditors to come after my assets. MN is not community property state, so I'm not liable for his credit card debt (please confirm). However, if I purchase a house with the mortgage/loan in my sole name, does the title have to be in his name as well since we're married? Can his creditors put a lien on the home?

If he signs a QuitClaim Deed, will his name come off the title so just my name is on the title? Or does his name remain on the title, but at time of divorce he has no "claim" to the house?

Is that considered fraud of any kind - to move all assets into one spouse's name to protect them from creditors?

Can creditors come after Joint Marital Property - furniture, Electrontics, jewlery, etc.?

I'd feel more protected (and my assets would be safer) if we got a legal divorce (and stay in a relationship) but he won't go this route unless I can show him it's in the best interest to protect assets.

Please help.

 

[randolph76]

What is the name of your state (only U.S. law)? Minnesota
My spouse ownes sole propritorship Snow Removal business. He racked up $80,000 of credit card debt in his/company name. (my name isn't tied to any of it.)
He put his business assets into a seperate LLC that he "owns". (4 trucks, plows, salt spreaders, etc.)
Can the creditors go after the assets in the LLC?

Is the credit cards personal cards or business cards that were set up in the business name/his name?

Creditors can go after assets in a LLC. A LLC protects your husband from creditors going after his personal assets.

My credit is perfect. We have seperate banking accounts and I have saved enough money to purchase a home. I don't want his creditors to come after my assets. MN is not community property state, so I'm not liable for his credit card debt (please confirm). However, if I purchase a house with the mortgage/loan in my sole name, does the title have to be in his name as well since we're married? Can his creditors put a lien on the home?

You wouldn't be liable for his credit card debt anyways, if it was made as a business line of credit under the LLC and not him personally. The title does not have be in his name as well. The LLC's creditors can't come after your assets including the home. Again, all this is assuming that the credit is taken out against the LLC and not as personal credit.

If he signs a QuitClaim Deed, will his name come off the title so just my name is on the title? Or does his name remain on the title, but at time of divorce he has no "claim" to the house?

Yes, if he signs a quit claim his name will come off the title. But earlier you said you were titling it in just your name. Are you asking "What if I title in both our names, and later quit claim his portion?".

And quit claiming would transfer his interest in the house to you. However, in a divorce there is usually some compensation for this (i.e. his share of the equity). So I don't see how this would help your situation.

Is that considered fraud of any kind - to move all assets into one spouse's name to protect them from creditors?

Can creditors come after Joint Marital Property - furniture, Electrontics, jewlery, etc.?

I'd feel more protected (and my assets would be safer) if we got a legal divorce (and stay in a relationship) but he won't go this route unless I can show him it's in the best interest to protect assets.

Please help.

Doing this wouldn't protect marital property as creditors would still come after it. However, if your husband is in this much debt and needs protection from creditors, the logical question is why isn't he pursuing a Chapter 11 or Chapter 7 bankruptcy? Bankruptcy is designed to eliminate debt and Chapter 11 may even allow his business to continue running normally.

 

[mibella1230]

His Credit Card is $20,000 in personal name. The other $60,000 is business credit card debt.
The SOle Propritorship that has the debt is "XXX Snow Removal". (the sole propritorship has no assets - just debts)
The LLC is a different EIN - different name. (the LLC has no debt - just assets.)
So if he defaults on the "XXX Snow Removal" cards, can they go after the seperate EIN LLC Company to repay the credit cards for the other company?

Sorry I wasn't following your response.

For the house, I want it titled in my sole name, but I have mixed messages if I can do this or not. I've been told that I can get the loan in my sole name. But I"ve heard both ways that the house can and can not be titled in just my name. My solution to that was to have him sign a quitclaim deed when I close on the house so it's just in my name. He has agreed to sign a quitclaim deed at the time of closing as I am making the sole investment into the home. I'm just worried that down the line, if we divorce, he can still come after a share of the equirty in the home. But it sounds like he can't if he signs the quitclaim deed...?

He stopped paying on credit cards 2 years ago. refuses to file chapter 11. says it will be off his record in 7 years, so why start the clock over by filing bankruptcy? He figures credit is shot, and he's safe if he puts debts on one sole propritorship and assets in an LLC - one company protecting the other? And then he is thinking that he'd put the rest of the assets in my name, such as my car and the house etc.
I don't know if this makes sense, but I'm trying to figure out if there is a benefit to a legal divorce vs. going through the shell game? It sounds like it may be because of your comment that the creditors can come after "marital property"? Can you please define "Marital Property?"

 

[randolph76]

His Credit Card is $20,000 in personal name. The other $60,000 is business credit card debt.
The SOle Propritorship that has the debt is "XXX Snow Removal". (the sole propritorship has no assets - just debts)
The LLC is a different EIN - different name. (the LLC has no debt - just assets.)
So if he defaults on the "XXX Snow Removal" cards, can they go after the seperate EIN LLC Company to repay the credit cards for the other company?

Sorry I wasn't following your response.

Okay, I see now - I was thinking the LLC was the same as XXX Snow Removal. In this scenario, yes the creditors could come after him personally. The LLC would limit liability to value invested in the LLC by your husband; in other words they wouldn't come after his personal assets.

For the house, I want it titled in my sole name, but I have mixed messages if I can do this or not. I've been told that I can get the loan in my sole name. But I"ve heard both ways that the house can and can not be titled in just my name. My solution to that was to have him sign a quitclaim deed when I close on the house so it's just in my name. He has agreed to sign a quitclaim deed at the time of closing as I am making the sole investment into the home. I'm just worried that down the line, if we divorce, he can still come after a share of the equirty in the home. But it sounds like he can't if he signs the quitclaim deed...?

Not necessarily; it depends if the courts view it as marital property. You would have to prove your case that it is not marital, which may be possible since it was bought with money solely attributed to you. If the court finds it is marital property, however, then even after a quit claim he would get an equitable division of the equity in the house and more importantly creditors could place liens against the property.

He stopped paying on credit cards 2 years ago. refuses to file chapter 11. says it will be off his record in 7 years, so why start the clock over by filing bankruptcy? He figures credit is shot, and he's safe if he puts debts on one sole propritorship and assets in an LLC - one company protecting the other? And then he is thinking that he'd put the rest of the assets in my name, such as my car and the house etc.

I don't know if this makes sense, but I'm trying to figure out if there is a benefit to a legal divorce vs. going through the shell game? It sounds like it may be because of your comment that the creditors can come after "marital property"? Can you please define "Marital Property?"

Yeah now I see what he's trying to do. Although, if the creditors caught wind of this they very well could try to go after the assets of the LLC since they were transferred out of the sole proprietorship for the purpose of hiding these assets.

Marital Property is property acquired during the marriage. If you're planning to get divorced to settle this business debt I don't personally recommend it. And creditors have gone after ex-spouses for assets acquired during the marriage.

In all reality, the best option is bankruptcy as this will clear his debts and can include his business and personal debts. The statute of limitations on debt in MN is 6 years. The 7 years, I assume you are referring to the period of time it remains on his credit reports? Ignoring debt is not wise and if the creditors sue and win he will have judgement(s) against him that will not just fall off.

I recommend speaking to an attorney in your area. They would have better insight as to whether your home purchase can be protected. I'd imagine that your husband would be advised to file for bankruptcy.

 

[divona2000]

...He stopped paying on credit cards 2 years ago. refuses to file chapter 11. says it will be off his record in 7 years, so why start the clock over by filing bankruptcy?...

...if the creditors sue and win he will have judgement(s) against him that will not just fall off...

Listen to randolph76. Creditors are not going to go away, and if they file/win the suit, they can just petition to have it revived when it gets close to expiring. That won't be "off his record".

 

[bigun]

Not sure why you'd be required to add your husband to the deed. Why not contact a real estate attorney and ask your question. A $200 consultation would be money well spent.

Your husband on the other hand could be in a world of hurt if he has aggressive creditors. If, he placed those assets in an LLC and was insolvent at the time his creditors can sue on the grounds of fraudulent conveyence. He knew he was broke and just set up the LLC to try and shield assets.
It would be the same thing if, he placed assets in your name.
I'd suggest you 2 follow Bigun's rule #1. Never involve others in your financial problems. Keep ALL finaces separate. No joing bank accounts and no joint ownership of property.

 

[mibella1230]

Thank you all for your advice. I find it so valuable.

I'm wondering if any of you know of any MN State Statues or other "formal" type documents I can find on the web to read up on it a little more.
I would like to direct my spouse to these so he can read up on them as well and hopefully I can convince him there is a better "answer" to this mess.

I would greatly appreciate any information, website, direction on where to go for supporting evidence to your WONDERFUL and MUCH APPRECIATED advice.

Thanks!!