Update and a request for advice is at the bottom of post #1.
A brief background... I've been struggling with/wanting to leave my marriage for a while, but have held off until the kids start school so I can support myself and them without having to cover daycare costs.
My husband runs his own business, of which I am 50% owner (it seemed like a good idea at the time, due to the tax benefits of having a partnership over a sole proprietorship. Things were good between us then), although I have almost nothing to do with the business. In the past year or so he has taken the business in a direction I haven't felt comfortable with. His plan was to invest more heavily in the business so that the expansion would bring in more revenue. I felt this was risky given the current economy. When this first happened I asked to change the terms of the business so I was no longer a partner; then he could do what he wanted to do without it impacting me.
He never did this.
Yesterday I found out that he funded the business's expansion with credit cards. I am not sure the total, but it is at least 25K, which is a lot for a one-person, small business. Although the cards are in the business's name, the terms of virtually all credit cards are that the owner has personal liability if the debts aren't paid. Meaning if the business cannot pay the debts, the credit card companies can go after our personal assets. We are not in a community property state, but my understanding is that because I am an owner of the business (50% as reported to the IRS), they can go after not just our joint assets, but things that are in my name only. If I wasn't on the business, accounts and assets in my name only would be protected.
We are barely making the mortgage, negative equity in the house, no health insurance broke. Our 'assets' include my IRA from my pre-children working life and the kid's 529 plan that their grandparents pay into (the account is in my name).
I asked again to be taken off the business ASAP and he said it would cost too much money in legal fees to solve a 'theoretical problem.' He assured me there's always enough money to pay the minimum balance. He's 200% convinced he will be able to pay them off once his lucky break comes in or the economy turns around, or in enough time, or something. Yeah. OK.
I need help figuring out my options. This is what I see:
1) Continue on as is for a few more years, hoping the business continues to be able to pay the minimum (I can't even dare to hope it would ever be able to pay more than that) . Then get out once the kids start school (2 years from now).
2) Forget waiting until the kids are in school and I can financially support the three of us; file now for a legal separation and get myself off the business in the process.
There must be something else I'm not seeing, can anyone else help me out with other possibilities?
It's been a few months since I posted this. There have been positives and negatives. H has refused to take me off the business so I called a lawyer myself and found out I am not liable for any credit card debt because I didn't sign the application and the account isn't in my name. However, he is liable, so our joint assets are potentially at risk. The more immediate issue is that the debts are increasing, the business is becoming less profitable, and he refuses to change strategies. Last month he had to borrow from a credit card to make payroll; this month he's only able to pay himself half of what he normally does... so not enough to cover our expenses. He's hopeful money will come in... from somewhere... within a few weeks. Basically he's 'working' almost all the time (doing what he loves, but not what generates income), and his ability to support the family is rapidly diminishing.
The better news is that my work-at-home income is increasing and although I don't yet make enough to cover much daycare (so I work late at night and early in the AM), I'm getting much better situated to move into working fulltime with a reasonable income once my younger child starts school in a year.
I've watched all this unfold in horror, not sure what to do. Then yesterday it dawned on me that we're ripe candidates for credit counseling. A neutral person might help him see better ways to run the business and help him understand that ever increasing credit card debt is really serious. And might even help us out of this mess.
Now I'm looking for help finding a good credit counseling agency, one that works with small businesses as well as personal finance. Any good recommendations? I have no idea where to begin with this.
Edited by Guestmama123 - 9/30/12 at 4:48pm