Short answer. Yes. Under the Civil Code, when a partner is expelled and the remaining partners continue the business without liquidating partnership affairs, the old partnership's creditors become creditors of the continuing business too. Their claims do not disappear just because the firm never went through a formal winding-up process.
What the law says
When a partner is expelled and the remaining partners continue the business either alone or with others without liquidation of the partnership affairs
Civil Code, Article 1840 — Creditors When the Business Continues. Read the full provision →
What the law says
The liability of a third person becoming a partner in the partnership continuing the business, under this article, to the creditors of the dissolved partnership shall be satisfied out of the partnership property only, unless there is a stipulation to the contrary
Civil Code, Article 1840 — Creditors When the Business Continues. Read the full provision →
Expulsion does not erase the old debts
Expulsion dissolves the old partnership, but dissolution is not the same as extinguishing what it owed. The Civil Code specifically covers the situation of an expelled partner: when a partner is expelled and the remaining partners continue the business, either alone or with others, without liquidating the partnership affairs, the creditors of that dissolved partnership are also treated as creditors of the person or partnership continuing the business. Skipping the formal winding-up does not give the continuing business a clean slate. The debts follow the business because, in substance, the same enterprise and the same assets simply kept operating under new ownership.
Why the law treats it this way
The rule exists because creditors extended credit to the partnership based on its assets and its ongoing operations, not on which individuals happened to hold the partner label at any given moment. If continuing partners could avoid old obligations merely by expelling a partner and pressing on without liquidation, expulsion would become a convenient way to shed liabilities. The law closes that gap by attaching the dissolved partnership's debts to whoever continues the business, whether the continuation is by the remaining partners alone, together with new partners, or with outside third persons who take over.
How far a new partner's exposure goes
If a new person becomes a partner in the entity continuing the business, that person's liability to the dissolved partnership's creditors is generally limited: it is satisfied out of the partnership property only, unless there is a stipulation saying otherwise. A new partner does not automatically expose personal, non-partnership assets to the old firm's creditors simply by joining a business that absorbed a prior partnership's obligations. This protection can be waived, but only by an actual agreement to that effect — it is not the default assumption.
What this does not change
The rule does not shield an expelled or retiring partner's separate creditors from that partner's own interest in the business, but it does give the dissolved partnership's creditors a prior right over that interest as against those separate creditors. It also does not protect any transfer made to defeat creditors: nothing in the provision limits a creditor's right to challenge an assignment on the ground of fraud. Continuing to use the old partnership name, including a deceased partner's name, does not by itself make that deceased partner's individual property answerable for the continuing business's debts.
Related provisions
- Civil Code, Article 1840 — Creditors When the Business Continues
- Civil Code, Article 1837 — Rights on Winding Up