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I was a co-applicant for a line of credit with a supply company with my husband for his construction business in 2004.

Nashville, TN |

We divorced in Nov. 2012, he had outstanding debt with the company that I was not aware of, but he had in the MDA that he was fully responsible for all business debt with the name of the company specifically listed in the MDA. We were sued by the company. He had 2 of his paychecks garnished and he then filed bankruptcy. The company is now coming after me and they are garnishing my check. Is there anything I can do?

Attorney Answers 3

Posted

Based on the bare facts you describe, you are probably liable. You are basically a co-debtor for all debts to this company. Your marital dissolution agreements does not bind third parties. The MDA cannot absolve you of your liability to the creditor, in this case, the supply company. The MDA agreement is between you and your ex, and no one else.

As for options, you can file bankruptcy, that will stop the garnishment. You would pay the debt in full, that will stop the garnishments; you could reach some sort of settlement with the company. If you end up paying the debt in part or in full, then you probably have a claim against your ex-spouse under the MDA agreement, e.g. you can go after him to pay you back. But as for the immediate need, the decision with any debt is pay it, or don't. If you don't, get with an attorney and found out what options (e.g. bankruptcy) make the most sense.

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Posted

As attorney Berkus explained so well, the MDA is an agreement between you and you husband and does not affect the supply company's right to pursue either of you for the debt. A bankruptcy filing will stop the garnishment and either discharge the debt or give you a way to repay over time, depending on you circumstances. Also depending on your situation and financial position, the supply company may be willing to settle,the debt for less than the full amount. However you pay, or how much you pay, you would likely have an action against your ex for breaking the MDA.

You should find an attorney and bring the MDA, agreement you signed with the supply co, and any other documents related to the debt or garnishment. You should be able to find one to meet at no cost to discuss your options.

This answer does not constitute legal advice nor form an attorney client relationship. I am not your lawyer. If you have a legal issue in Tennessee you may contact me for a free consult.

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Posted

This happens quite frequently. Since you signed the original personal guarantee, you are jointly and severally liable for the debt to the supply company. Pursuant to your divorce decree, your husband is responsible to "indemnify" you for this loss but only after you pay the debt.

PRACTICE POINTER: Whenever a party gets divorced or in the case of business partners, one partner leaves the company, a written notification should be sent out to ALL suppliers and other companies CANCELLING any personal guarantees you may have signed. The cancellation will take effect the date received generally. While it will not limit the liability of the personal guarantor for prior purchases, it will prevent the party from becoming legally responsible to pay the debt for subsequent purchases. KEEP COPIES OF ALL WRITTEN NOTICES OF CANCELLATION and send them by fax or certified mail to insure that they are actually received (or hand deliver them when possible).

Attorney is Licensed in Arizona, California, and Colorado only. The opinions and comments offered are in the nature of general business advice relating to generic questions that might be raised. The use of this site is not intended to form an attorney client relationship of any kind. The reader is advised that every situation is different and you should always consult in person with a licensed attorney for the particular jurisdiction in question when your legal rights may be effected.

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3 comments

Matthew Scott Berkus

Matthew Scott Berkus

Posted

Great reminder Guy.

R. Russell O'Rourke

R. Russell O'Rourke

Posted

Thanks Guy. I don't do domestic relations cases, but I see this type of thing happen quite frequently. I wish that more domestic relations attorneys would think to do just what you recommend--they should read you Practice Pointer.

Guy W Bluff

Guy W Bluff

Posted

Thank you for the Compliment. If you follow me you will notice Practice Pointers about 10% of the time - specifically for the attorneys benefit.

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