⚡ 10-Second Rule
Every partner is on the hook for team debts, but creditors must drain the team's wallet before raiding a partner's.
🧒 ELI-10 Scene
Five kids run a snow-shoveling crew and owe the hardware store $200 for shovels. The store can make any one of them pay the whole $200 — that's the scary part of being a partner. But there's an order to it. First, the store must empty the crew's shared money jar. Only if the jar runs dry can it knock on one kid's door at home. New kid Aiden, who joined yesterday, isn't personally stuck with last month's shovel bill. And when the crew breaks up, the jar pays the hardware store first. Whatever's left gets split among the kids.
⚖️ Actual Rule
Under RUPA § 306(a) (1997), all partners are jointly and severally liable for all obligations of the partnership unless otherwise agreed by the claimant or provided by law. But § 307(d) imposes an exhaustion rule: a judgment creditor may not levy execution against a partner's personal assets to satisfy a partnership obligation unless the creditor also has a judgment against that partner and the partnership's assets have been exhausted (or exhaustion is excused, as where the partnership is bankrupt). An incoming partner is not personally liable for obligations incurred before admission (§ 306(b)) — only the newcomer's capital contribution is at risk for old debts. RUPA separates dissociation from dissolution: a partner's withdrawal (§ 601) does not automatically end the firm. If the business continues, the partnership must buy out the dissociated partner's interest (§ 701), and a wrongfully dissociating partner (§ 602) is liable for damages the wrongful exit causes. A dissociated partner remains liable for pre-dissociation obligations, and under § 703 can be bound on partnership obligations incurred within two years after dissociation to parties who reasonably believed the person was still a partner and lacked notice; filing a statement of dissociation cuts off that exposure ninety days after filing (§ 704). Dissolution occurs only on the events in § 801 — in an at-will partnership, notice of a partner's express will to withdraw dissolves the firm. The partnership then winds up (§ 802): in settling accounts under § 807, partnership assets first pay creditors, including partners who are creditors, and any surplus is distributed to partners according to the positive balances in their accounts (with partners contributing to cover any shortfall).
ELI-10 translation: any one partner can be forced to pay a team debt in full, but only after the team's own money runs out — and at breakup, outsiders and lender-partners get paid before owners split the rest.
🔍 Ask These Questions
- Is the debt a partnership obligation — incurred by a partner with authority in the ordinary course? (Is this really the team's bill, not one kid's private bill?)
- Which partners are personally liable — was the person a partner when the obligation was incurred, or protected by LLP status? (Was this person on the team when the bill was created?)
- Has the creditor satisfied the exhaustion rule — a judgment against the partner plus exhausted partnership assets? (Did the store empty the team jar and win in court against that kid first?)
- Is a departing partner still exposed — pre-dissociation debts, plus two years of new debts to parties without notice? (Leaving the team doesn't erase old bills, and quiet exits can add new ones.)
- Did the exit cause dissociation with a buyout, or full dissolution — and was the dissociation wrongful? (Does the team keep going and pay the leaver, or shut down completely?)
- In winding up, was the § 807 order followed — creditors first, including partner-creditors, then partners by account balances? (Pay outsiders and lenders first; owners split only the leftovers.)
⚠️ Bar Trap
Exam language: Examiners lean on "jointly and severally liable" to suggest a creditor can proceed straight against any partner's personal assets. Liability and collection are different questions: under RUPA § 307(d) the creditor needs a judgment against the individual partner and must first exhaust partnership assets. A second recurring trap treats every partner withdrawal as dissolution; under RUPA, dissociation usually triggers only a buyout while the firm continues, and dissolution follows only from a § 801 event.
ELI-10: "Everyone's on the hook" doesn't mean "grab anyone's piggy bank first" — the team jar gets emptied before any kid's own money. And one kid quitting usually doesn't kill the team; the team just buys out the quitter.
🧪 Question
A supplier obtained a $60,000 judgment against a three-partner general partnership for unpaid deliveries, and in the same action obtained a judgment against one partner individually. The partnership is solvent, holding $150,000 in a partnership bank account, and is not in bankruptcy. The individual partner owns a vacation cabin worth $70,000. Seeking the fastest recovery, the supplier immediately sought to levy execution on the cabin without attempting to collect from the partnership account. The partner moved to block the levy.
Should the court permit the supplier to levy on the cabin?
(A) Yes, because partners are jointly and severally liable for all partnership obligations. (B) Yes, because the supplier holds judgments against both the partnership and the partner. (C) No, because the supplier must first exhaust the partnership's assets before executing against a partner's personal assets. (D) No, because a partner's personal assets may never be used to satisfy partnership obligations.
Answer: (C). Joint and several liability makes the partner answerable for the full debt, but RUPA § 307(d) bars execution against personal assets while partnership assets remain available. With $150,000 in the partnership account and no exhaustion excuse, the levy on the cabin is premature.
💡 Why the Wrong Answers Are Wrong
- (A) confuses the existence of liability with the order of collection; joint and several liability does not waive the exhaustion requirement.
- (B) identifies a necessary condition — a judgment against the partner — but ignores the additional requirement that partnership assets be exhausted first.
- (D) overcorrects into an LLP-style shield; general partners' personal assets are reachable once partnership assets are exhausted.
- ELI-10: The misconception is thinking "everyone owes it" means "collect from anyone, in any order." The team's jar must run dry before anyone's home piggy bank opens.
