Divorce is stressful enough without the added problem of dividing business debts. Many couples in North Carolina own small businesses or hold investments that come with financial obligations. When a marriage ends, deciding who is responsible for those debts can become a major point of contention.
At Martine Law, we understand how complicated divorce becomes when business assets and liabilities are involved.
This guide explains how North Carolina courts approach business debt division, the factors that influence those decisions, and steps you can take to protect yourself.
How does it work legally in North Carolina?
North Carolina is an equitable distribution state. This means that property and debt are divided fairly, but not necessarily equally. Business debts are treated like other marital liabilities and fall into one of three categories:
- Marital debt: Acquired during the marriage and typically divided between spouses.
- Separate debt: Acquired before the marriage or after the date of separation, usually the responsibility of the spouse who incurred it.
- Divisible debt: Accrued between the date of separation and the final divorce judgment, often related to ongoing business operations.
The court will look at several factors when dividing these debts, including:
- When and why the debt was created.
- Which spouse benefited from the debt.
- Each spouse’s contribution to the business.
- The earning potential of both spouses.
- Each spouse’s role in running or managing the business.
If you own a business, the court may require a professional valuation to determine the company’s worth and its associated debts.
What should you do if you own a business and are divorcing?
Dividing business debts in a divorce is complex and often requires careful planning. If you own a business, you should:
- Gather financial documents: Collect records of loans, credit agreements, tax returns, and business expenses.
- Separate personal and business finances: Keep personal spending separate from company accounts to avoid disputes.
- Hire a professional valuator: An accurate business valuation helps ensure fairness.
- Consider mediation: Negotiation may help you reach a fair agreement without a lengthy trial.
- Work with an attorney: A lawyer with experience in both family law and business issues is essential.
We can help you create a strategy that protects your financial future and ensures your business can continue to operate after the divorce.
Common outcomes in business debt division
Courts try to make fair decisions that do not destroy the business or leave one spouse unfairly burdened. Some common outcomes include:
- Assigning debts to the spouse who manages or owns the business.
- Offering one spouse a larger share of assets in exchange for taking on more debt.
- Splitting debts proportionally to income or involvement in the business.
- Selling the business and dividing both profits and debts.
Each case is unique, and outcomes vary depending on your situation and the judge’s discretion.
Key takeaways and legal advice
- North Carolina divides business debts based on fairness, not automatic 50/50 splits.
- Proper documentation, valuations, and legal guidance are essential.
- Working with an experienced attorney can save time, stress, and money.
If you’re facing a divorce that involves business ownership or debts, Martine Law is here to help. We can walk you through your legal options, represent your interests, and guide you toward a resolution that protects your future.
Talk to a North Carolina Divorce Attorney Today
Divorces involving business debts require skilled legal support. Our attorneys are ready to help you navigate these complex situations.
Call us today or contact us online for a consultation.