a small prediciment

I have a problem. My husband had a farm that he jsut recently closed. He operated this farm as a sole proprietor for the last 25 years. The big problem is I just found out that he has a bunch of business debt,approx. 145k. I knew there was some, but not this much.

We have been married for 20 years and I own no shares in the business, never did and did not have any interest in his business. While I did a little work to help was always paid as an employee for doing. The credit cards that I have are in my name only. We have no joint bank accounts and I do not have a supplemental card on any of his credit card accounts, nor he on mine.

Our home is in both our names and is valued at over 320K. We owe 25K on the mortgage. Our equity in it would be approximately 230,000. We have no personal consumer debt jointly and I have no real outstanding amounts on my personal credit cards..

The only “personal” debt we have is the mortgage. The only savings we have…is a $5500 RRSPs and they are in my name (I have contributed to them myself, out of my own money)

I also have a substantial inheritance that I received after my mother’s death. It has been kept separate and has not been co-mingled with our personal finances. My understanding is that because it is an inheritance it is not considered marital property.

My husband has now got a different job and is earning about $60,000 a year. I recieve EI benefits of about $560/month. We own all the contents of our home. We are in the process of trying to sell our home so that we can relocate.

My concern is that we will lose our home because of his business debt. Even with no mortgage his business debt amounts to more than our mortgage ever was and my thinking is that he will lose his half of the equity in our home to cover off his business debt…which throws the “mortgage free plan” out the window and jeopardizes my interest in the home because he would need to secure financing, using his half or “OUR” equity to secure financing.
Other than monthly recurring living expenses, that is our entire financial situation in a nutshell.

Am I responsible for a business debt that he incurred while operating a business that I had no part of?….what about if he chose to pay mortgage payment etc through his business accounts and I was unaware of it?
Is my home in jeopardy if he files for Bankruptcy?

Posted on Wednesday, January 21, 2009 | Filed under: Bankruptcy
 posted by Questions @ 8:56 am 1 Comment
1 Expert Comment:

 At January 31, 2009 | 9:22 am , Barton Goth, Trustee in Bankruptcy Said...

This all comes down to the type of business that has been set up. As the farm was run as a sole proprietorship this is not a separate legal entity so ultimately the business was simply operating under your husbands name, there is no distinction between him, his debts or the business debts. As a result the creditors of your husbands (and the business) are able to come after his share of any personal property.

In terms of how this is going to impact the home, this is difficult to tell without sitting down to review all the details surrounding your situation. So the best thing to do is to contact a trustee and make arrangements to review these details.

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