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The Limitations on Discharges for Business Debts

25 June 2015 by Franklin Vasquez

As a small business owner filing for Chapter 7 bankruptcy, there are some debts that you can expect to have discharged by the court when your filing is complete. However, not all debts will be discharged. Before filing, you should be clear on which of your debts you can expect to clear and which ones will remain.

Which Debts Are Discharged?

A Chapter 7 bankruptcy filing only clears those business debts which you are personally liable for. For instance, if you charged expenses for your business to your credit cards, you can expect those to be discharged. Other business expenses you can look forward to having removed from your credit history include unsecured business debts, promissory notes, and lawsuits.

Unsecured debts refer to those lines of credit taken out by you for your business that were not secured by collateral. For instance, if you received merchandise for your business but did not offer any sort of deposit or collateral for it, you can ask that the debt is discharged.

If you do have debts that are secured with collateral, your creditors can take the collateral offered. However, if your collateral is not enough to cover the amount of debt that you owe, you can have the court discharge it. For instance, if you gave a deposit of $1,000 to a supplier, but you owe $2,500 on your bill, the supplier can keep the deposit and you can ask the court to discharge the remaining $1,500.

Which Debts Are Not Discharged?

Since the purpose of the Chapter 7 is to clear your personal debts, the rules governing nondischargeable debts applies to your case. This means that debts, such as child support, certain tax bills, and student loans, cannot be discharged. If you took a cash advance immediately before filing for bankruptcy, it is non-dischargeable even if you used it to help keep your business afloat.

To deal with the remaining debts from your business, you and your bankruptcy attorney can use other methods. One of those options is to basically dissolve your company. Dissolving your company is more than just walking away from it. There are legal documents that must be filed with the court and the state. Your attorney can help you determine which documents need to be filed.

If you are unsure whether or not a debt can be discharged, talk to your attorney and look at sites like http://www.glaserebbs.net. He or she can help you determine which debts will remain or stay and what actions you can take to clear your credit history.

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