Attorney
Walter White’s little chemistry business created a few liabilities his wife never signed for but ended up dealing with. It turns out having a husband that becomes a drug lord comes with a lot of strings attached.
It’s doubtful that the Breaking Bad writers had New Mexico’s community property laws in mind when they were crafting Skyler’s storyline, but the degree to which she becomes entangled in Walter’s illicit business is striking given she did not know about it in the beginning.
While most business owners in Albuquerque work in industries considerably more mundane than the Whites, the mixture of business and personal will seem very familiar. This is especially evident when a business owning couple files for divorce.
When a marriage ends, shared business debt doesn’t just disappear. Someone has to pay for it. And in New Mexico, that someone might be both of you, whether or not you explicitly agreed to take on that debt.
Three Triggers to Look for When Looking at Business Debt
Under New Mexico’s community property law, the default presumption is that all assets and debts created or that increased during the marriage are marital property. And marital property must be divided 50/50 during a divorce.
When someone tries to argue that a debt should be considered separate property because their name is not attached to it, and they did not agree to incur it, negotiations can get a little bit testy. As someone who has years of business experience and an MBA as well as a law degree, Bob Matteucci is often asked to wade into these cases and help hammer out an agreement.
There are three triggers that can tip business debt that is teetering on the line between separate and marital firmly into marital territory:
- Formation and growth during the marriage: If a company was formed, funded, or grew substantially while you were married, New Mexico law treats it as community property. Debts that were incurred in order to create or grow a marital business are marital debt.
- Commingling of funds: The line between separate and shared debt gets blurry when you move money across it. So, if you allowed your partner to make a payment toward a business debt from your joint checking account, that debt (and any assets it is tied to) can be transformed into marital property. The fancy legal word for this is transmutation.
- Spousal involvement in operations: Even when couples are careful to keep a business classified as separate property, the business and any debt tied to it can become marital when both spouses give their time and attention to it. A spouse’s involvement with a business can turn an individually owned business into marital property.
Each of these triggers can transform a business that was previously separate property into one that is jointly owned.
Timing Matters More Than Most People Realize
Timing is the trigger that turns most businesses into jointly owned businesses. Our state law is clear that whatever happens after you walk down the aisle belongs to both of you.
But timing also matters at the end of the relationship. When you incur a debt relative to when you file for divorce matters.
For business owners specifically: if you’re considering taking on new financing—a new credit line, equipment lease, or commercial mortgage—and divorce is on the horizon, it’s a good idea to talk to a financial savvy attorney like Bob Matteucci first. The timing of your signature can have lasting consequences.
Debts incurred after separation, when you are actively moving toward divorce, may be treated as separate. New debt drawn against a newly created account that does not have your soon-to-be-ex’s name on it may be considered separate debt even though the marriage is still technically intact.
Serving Families with Dignity & Compassion
If you’re a business owner in the Albuquerque area considering divorce, or already in the process, you better call Saul Bob Matteucci. Thanks to the years he spent running his family’s company before his divorce inspired him to become a lawyer, Bob understands the business world and the financial decisions that drive it. He is ready to help you find a path forward that protects your business and the well-being of the people who built it. Please contact him today to set up a meeting.