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

UPDATED: Oct 25, 2010

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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