Loan during divorce in California

[ianpmccarthy]

Hello all,

My wife and I, who are partners in a small business, are beginning the divorce process - in this case we likely qualify for a "summary dissolution". I will be taking over her side of the business over the next few months. We had discussed taking out an SBA loan to grow the company more. Even with the uncertainty that comes along with a divorce, I still think it is the right time to do so. The wrinkle is that she is, understandably, not interested in being on the hook for those loan payments. This being California, it seems challenging to separate ourselves, financially speaking.

The magic number seems like six months; If we were to change the business from a partnership to a sole proprietorship, the loan officer says that it takes six months before she is really off the hook. If it were a personal loan, it would be six months after the finalization of our divorce. The question then, is what if anything can we do to move forward with the loan while putting all the liability solely on myself, and put her mind at ease? Thank you all for your time.

 

[Zigner]

Tell me more about the small business. Is it a brick and mortar business? If so, do you own the building/land, or do you rent (lease) it? Are there currently any debts associated with it?

 

[ianpmccarthy]

Zigner,

Thanks for your response. It is a catering business - no brick and mortar. We rent space in a commissary as needed, so no real lease even. No debts to speak of.

 

[Zigner]

If you take out the loan, you likely will not qualify for a summary dissolution. I would suggest that you consult with an attorney to confirm and help you decide.
(Remember, the loan officer is there to sell a loan - s/he isn't a legal expert.)