Am I Responsible for My Husbands Judgment If He Is a Sole Proprietor?

A sole proprietorship is the easiest form of business to create and it also carries the most risk. You could end up owing quite a bit of money in connection with your husband's business debts if his business is a sole proprietorship. Keeping your finances strictly separate is the best method of protecting your accounts from a creditor's judgment in connection with your husband's sole proprietorship.

No Liability Protection

A sole proprietorship offers no liability protection for a business owner's personal assets when a creditor is pursuing the owner for a business debt. A creditor obtaining a judgment against the business owner for the payment of a business debt may move to seize personal banks accounts and property up to the limits of the judgment. If you share any financial assets or property with your business-owner husband, a creditor may execute a court judgment against those assets or property because your husband's name is on the title or the account.

Garnishing Wages

Your wages should be exempt from garnishment for the payment of your husband's business debt because your wages are in only your name. This is the case even if you're an employee of your husband's business. It may be a smart financial move to keep your earnings out of any bank account you share with your husband while a creditor is pursuing a judgment against the business. This helps keep a creditor from seizing your wages if the creditor is able to freeze the account through a court judgment.

Assets Before Marriage

Any assets you had before your marriage should be exempt from a creditor's judgment, even if your husband is the sole proprietor of a business. States usually consider property held by a spouse before marriage as separately owned, which means a creditor can't move to seize or place a lien on the property because it has no connection to your husband's business debt. If you used any of your property as collateral for a business debt, this may give a creditor the ability to seize the asset or place a lien on it.

Federal Tax Debts

Taxes owed to the federal government are in a separate liability category. If you and your husband file taxes jointly, you share in the liability associated with any taxes owed. Basically, if one of you owes, you both owe the government. The IRS has broad powers to seize your assets, garnish wages and drain your bank accounts while in pursuit of back federal taxes. In most cases, the IRS doesn't need a court order to execute any action to recoup a delinquent tax debt.

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Debt Consolidation Vs. Chapter 13 Bankruptcy

If you're in debt, you have a number of options to help you deal with your finances. Debt consolidation and Chapter 13 bankruptcy represent two different approaches to getting out of debt. While either choice can potentially help you resolve your debt, each has advantages and disadvantages that you should understand before determining which choice offers the best solution.

Function

Chapter 13 bankruptcy allows debtors to reorganize their debts and repay them over time from future income. Chapter 13 can help you catch up if you've fallen behind on your financial obligations and prevent you from losing control of your assets. The purpose of a debt consolidation is to allow you to combine multiple debts into one monthly payment so you can pay down your debts faster.

Process

Chapter 13 is a legal process regulated by the U.S. Bankruptcy Courts. You must file a bankruptcy petition to initiate a Chapter 13 case. You create a repayment plan based on your income and make regular payments to the court over a period of three to five years. With debt consolidation, you typically combine payments through a loan or line of credit and make monthly payments to the lender according to its repayment schedule.

Cost

Both debt consolidation and Chapter 13 can potentially be costly. As of 2010, the filing fee for a Chapter 13 case is $274, according to the U.S. Courts website. However, if you are represented by an attorney, your case can cost thousands of dollars. With debt consolidation, you typically have to pay interest on the loan each month. If you're using a home equity loan or line of credit, you may also have to pay closing or monthly maintenance fees.

Benefits

The primary benefit of debt consolidation is that it can help you save money in interest costs and monthly payments if you consolidate to a lower rate. The main benefit of Chapter 13 is that it can help you avoid collection actions from creditors. When your bankruptcy petition is filed, an automatic stay goes into effect that prevents creditors from pursuing outstanding debts. A Chapter 13 bankruptcy can help you avoid lawsuits and foreclosure if you are able to make plan payments regularly.

Considerations

Debt consolidation is not without its pitfalls. For example, consolidating credit card debt can help you save money, but it can land you in more debt if you run up your balances again. If you have poor credit, it can be difficult to obtain financing for a consolidation loan. If you file Chapter 13 but are unable to make plan payments, creditors can be free to resume collections against you. Even if you complete your plan successfully, your bankruptcy filing can damage your credit for up to seven years following your discharge.

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How to Pay Off $100,000 in Loans

A large debt may seem impossible to pay off when you look at the total debt next to your monthly income. Paying off your $100,000 in loans, however, is within reach when you carefully monitor your expenses and strategically pay the debt each month. Do not let the debt overwhelm you; take a breath, lay the paperwork out in front of you and create a plan for getting out of the red.

Instructions

1

Prioritize your $100,000 in loans on a sheet of paper from the highest interest rate to the lowest. Part of paying off your loans is knowing which loan costs the most per month. For example, if you have a business loan with a 10 percent annual interest rate and an unsecured loan with an 8 percent annual interest rate, the business loan costs more. You will pay more money on your loans in the long run if you do not pay down the most expensive loan first.

2

Write out the minimum payment for each loan on the sheet of paper containing your loan list. To pay off your loans, you will pay the minimum monthly payment on every balance except the loan with the highest interest rate.

3

Create a budget of your monthly income to determine the most you can spend per month on debt reduction. When creating your budget, you may find that you spend needless amounts of money on monthly subscriptions, clothing, eating out or other purchases. Seeing the numbers in front of you will help to tighten your budget for paying down your $100,000.

4

Spend some of your saved money from savings accounts to pay off your $100,000 in loans. The interest your debt accrues is often more than the interest your money earns in a savings account. Paying off some of your loans or part of a loan will eventually offset the loss. Use part of an untouched emergency fund for debt reduction purposes as well.

5

Raise your monthly payments if you have the cash available. You can pay debts off quicker with less interest if you find ways to pay more per month. For example, starting a part-time job or business can bring in extra cash for loan repayment. Renting a room in your house or limiting your driving can free up extra money each month.

6

Consolidate your debts if possible. Your bank may buy all of your loans and create one large loan with a better interest rate if your credit matches its terms. Debt consolidation will make your $100,000 loan repayment easier by creating one bill per month through one lender.

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Three Rules for Debt Management

Debt can be overwhelming and lead to financial ruin for many people. It can cause poor credit scores, bankruptcy and other financial problems that affect all aspects of someone's life. For this reason, proper debt management is key to financial survival. Not only can it ease the strain of insurmountable debt loads, but it can also result in better credit and access to larger purchases, such as a new home or car.

Pay Bills Early

Even if you pay your bills, you may be socked with excessive late charges and miscellaneous fees if you don't pay them on time. This can, in turn, put you even deeper in debt. To avoid this, pay your bills early to ensure that you don't end up paying more than what you actually owe. You can even pay your bills at least two to three days early just to ensure that the payment has processed by the due date and your creditor can't try to charge you anything extra.

Get Organized

You can't know how deep in debt you are until you organize your finances. Take some time to write down every debt you have and what the total amount of the debt is, including late charges and any associated collection fees. Then, make a list of your income, tallying up all money coming into your household. Once you have a basis of comparison for how much is coming in versus how much is going out, you can then figure out how to pay off debts and where you need to make some changes, financially.

Get Help

Don't wait until you are too deep in financial crisis to get help with debt management. If you cannot do it on your own, there are numerous reputable debt counseling agencies available that can help to get you back on track. But don't wait until it is too late or you are extremely deep in debt. At the first hint of trouble, seek assistance.

Significance

If you let your debt go, then you may find yourself in deeper trouble financially than you might have been if you tried to work with your creditor on a payment plan. Don't ignore the calls and letters; instead, explain your current financial status and see if there is some way to work out what you owe in a payment plan until you can catch up your account.

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Housing & Credit Counseling

Housing and credit counseling comes in many forms. For example, several nonprofit housing and credit-counseling agencies support borrowers who are already behind or about to fall behind on their debts. In addition, the federal government provides counseling by encouraging mortgage lenders to modify loans. Success begins with facing your problems head-on and developing a plan of attack. Don't wait, and don't hide. Start now.

Best Counseling Resource

Contact the National Foundation for Credit Counseling, a nonprofit organization founded in 1951. According to its website, the NFCC assisted more than three million Americans in 2010 and has more than 800 offices in the United States and Puerto Rico. Offices are staffed with counselors who are trained in budget- and credit-management services. Initial consultations are free and confidential, and cover all types of debt, from credit cards to mortgages. Begin a consultation online or call 800-388-2227.

The NFCC: What They Will and Won't Do

The NFCC will review your budget during the first meeting and discuss your financial goals, which probably include getting out of debt. Even if you're late on your payments, call the NFCC anyway. The counselor may be able to enroll you in a debt management plan, also known as a DMP. These management plans are terrific tools for consumers who are struggling to manage debt payments. The consumer makes one monthly payment to the counseling agency, who distributes it to creditors, and the accounts are closed. In exchange, counselors are usually able to negotiate a lower interest rate, eliminate fees and arrange for the debt to be paid in full within five years. Accounts are also brought to "current" status, which improves the consumer's creditworthiness. The NFCC also offers bankruptcy counseling services but does not make or facilitate consumer loans.

HAMP Eligibility

If you're concerned about making your mortgage payment, consider the Home Affordable Modification Program, also known as HAMP. According to the federal government's Making Home Affordable website, homeowners, delinquent or not, may have their mortgage payment reduced to 31 percent of their monthly pretax income if they meet certain criteria: have a financial hardship, occupy the home as a primary residence, secured a home loan before 2009, have a payment that's more than 31 percent of pretax income, can document their ability to afford the new payment and owe less than $729,750.

According to the U.S. Department of Housing and Urban Development (HUD), those who had their loans modified successfully saw a 40 percent drop in their payments, many by $1,000 or more. If you are not eligible for HAMP, your lender may have another program to assist you. You may also need to consider a short sale.

Contact your mortgage lender directly to investigate both options.

Settlement

If you've exhausted your counseling and HAMP options, you may need to consider debt settlement. In a debt settlement plan, a consumer pays roughly 40 percent of the outstanding balance. Usually, you have to be between three and six months behind on your payments. Once you've settled, however, it's not reported as "paid in full" to your creditors. Prepare for your credit score to hit rock bottom. However, you'll be debt free.

Bankruptcy

Bankruptcy is your last resort. Many debts, such as credit card debts, can be discharged. However, your credit will be severely damaged; bankruptcies are reported for 10 years. It may affect your employment status, and it could affect your insurance premiums. However, employer-sponsored retirement plans are safe from creditors, and you may be able to keep your home and your car. Both debt settlement and bankruptcy may require the use of a professional. Be wary of settlement companies, and check the Better Business Bureau before revealing personal details.

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How Can I Cosolidate All My Debts?

Consolidating your debts is a method of combining outstanding accounts such as credit cards and loans into one payment. This way of dealing with debt can simplify your monthly accounting and loan payment. In addition, if you're able to secure a lower interest rate on the consolidation, you can pay down your principal quicker. There are various ways to consolidate your debts. Explore your options and pick the one that works for you.

Instructions

1

Use money from your home's equity. Go to a home loan lender and complete an application for a home equity loan or line of credit. Borrow cash from your equity and use the funds to get rid of your credit card balances and other debts.

2

Get a personal debt consolidation loan. If you don't have equity, use other collateral like the title to a paid off car to secure funds for a personal debt consolidation loan. Shop around for the best interest rate. Choose a short term loan of three or four years and pay off your other debts with the money. This will mean that you have only one loan payment to make each month.

3

Use a life insurance policy to pay off your debts. Talk with your insurance agent to see if you're eligible to borrow money from your whole life policy. Repay the money over time, or have the borrowed funds deducted from the policy's value.

4

Work with a company to consolidate debt. If you can't qualify for a bank loan or home equity loan, use a debt consolidation company. This type of consolidation simplifies debts by combining balances from credit cards and loans into one new bill. You send a payment to the debt consolidation company each month and the company pays individual creditors for you.

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Estate Lien Laws in Mississippi

Liens are claims that creditors can make against personal property for debts that have not been paid. Because these liens are legal documents focused on the property itself and not a particular debtor, they are considered part of estate debt and can continue on even after an owner dies. Many liens are filed by contractors that did work on a property and were not paid, known as mechanics liens, while other liens may be created by banks and even the government. Each state, including Mississippi, has its own lien laws.

Contract and Subcontract Obligations

In Mississippi, only workers that have had direct contact and agreement with the owner of the project can file a lien in order to claim payment. This law prevents subcontractors from filing a lien on a property when the owner has actually paid the primary contractor, and the obligation lies with this contractor instead of with the owner.

Filing Liens

When it comes to filing liens in Mississippi, the supplier of services or equipment at the owner's request must create or "perfect" the lien by filing the notice of the lien with the Chancery Clear in the county where the work itself was located. The lien cannot exist unless this recording takes place and is completely ineffective, regardless of the language of the contract, unless a local government has a record of it. This is a common lien law for most states.

Notices and Suits

Many states impose particular time limits on lien filing and claims. In Mississippi, a creditor can file a lien, but the filing must take place within 12 months after the actual work was done and the payment date for the work occurs. If the creditor eventually wants to file a lawsuit, then the same 12-month time limit applies. If the creditor does not file the suit within a year after the payment date, then the lien may be wasted completely.

Tax Liens

Tax liens are created by governments to seize assets to pay for late taxes, often property taxes. Mississippi uses an overbid auction system to sell off assets in a tax sale in order to collect payment on such property taxes. There is also a redemption period in the state, which must be ended by a notice of final sale, which the sheriff must serve to the original owner.

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