Can a corporation’s creditors take marital property in a lawsuit against an owner/officer named as co-defendant?

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Can a corporation’s creditors take marital property in a lawsuit against an owner/officer named as co-defendant?

My husband’s failing business, which is a c-corp, is starting to be sued by its creditors. He is named as a co-defendant. Is our personal property, i.e: our house, car, etc. in jeopardy?

Asked on October 25, 2010 under Bankruptcy Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The issue is why and how your husband is being sued. If the business is a C-corp, he, as an owner, is not personally liable for the corporation's debts or obligations. While it's possible he is being sued in error, it's also possible then that the creditors believe that they have grounds for holding him liable. That could be because they believe he has personally done something wrong (e.g. committed fraud against creditors) or because--as is very common for  small business owners--he personally guaranteed some or all of the debts. (Also note: most "corporate" credit cards are ones for which the card holder is actually liable; it's just that the company will write the check on the expenses.) If there is grounds for personal liability against your husband, then your personal assets could be at risk; if there is only liability against the corporation, and your husband neither gauranteed debts, nor committed any wrong (and the debt is not from a corporate credit card for which he may be personally liable), then your personal assets should be safe.


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