Handling Debt with a Spouse’s Business in Florida Divorce
Dividing a family-owned or closely held business in divorce is complicated enough—but the business’s debt can make matters even more challenging. If one spouse owns a business that has accumulated liabilities, the other spouse may be concerned about being held responsible. Whether that debt is considered marital or non-marital depends on timing, purpose, and legal responsibility.
When Business Debts Are Marital
Under Florida Statute § 61.075(6)(a), debts incurred during the marriage are presumed to be marital debts, even if incurred by only one spouse. This includes business liabilities, especially if:
- The business was created during the marriage
- Marital funds supported the business
- The couple benefited from the business income
If the business is found to be a marital asset, its liabilities may also be shared. However, courts also evaluate whether the non-owner spouse had any control over the business or exposure to the debt itself.
Case Example: Debt and Default in a Business-Owned by One Spouse
In Cardella-Navarro v. Navarro, the husband owned a yacht brokerage business and was the sole shareholder. The company defaulted on loans and owed over $6 million in liabilities, including sales tax penalties. The trial court originally assigned half of this debt to the wife.
On appeal, the court reversed, finding that most of the debt was incurred after the parties had separated, and the wife was never legally liable for the debt. There was also no privity of contract between the wife and the creditor. Importantly, the husband had personally guaranteed the business debt.
What Courts Consider When Dividing Business Debt
Courts will look at a range of factors, including:
- Timing of the debt – Was it incurred before, during, or after separation?
- Use of funds – Did the business support the household or was the debt used for non-marital purposes?
- Legal liability – Did both spouses sign loan agreements or personal guarantees?
- Mismanagement – Was there financial misconduct or irresponsible business practices?
If a court finds that one spouse misused marital funds or mismanaged the business, it may assign more of the debt to that spouse under equitable principles.
Shifting the Burden of Proof
When one spouse argues that business debt is non-marital, they carry the burden of proof. In Hamilton v. Hamilton, the trial court improperly found business credit card debt to be non-marital without evidence, and the appellate court reversed. The presumption is that debt incurred during the marriage is marital unless convincingly rebutted.
Strategic Tips
- Get documentation: Loan terms, business tax returns, and corporate formation documents can clarify liability.
- Consider the timeline: If the business fell into debt after the spouses separated, it may be easier to argue it’s non-marital.
- Hire a forensic accountant: Business debt may be commingled with personal expenses, requiring expert review.
If you have questions about equitable distribution or need guidance during your divorce, contact Rhoden Law Group at 321-549-3162 call/text or use the contact form on this site. We serve clients in Melbourne, Titusville, Viera, Palm Bay, the beaches, and throughout Brevard County.