With the coronavirus pandemic going on, many business owners may be wondering how their business debts can be eliminated in a Chapter 7 bankruptcy. If you own a business, have debt, and can’t pay, filing bankruptcy can help you eliminate your personal liability. Keep in mind, however, that even if you are not personally liable for the debts, in a Chapter 7 bankruptcy, your business will still be liable for the debt. This is because the business is a sole proprietorship.
Business Debts That Can Be Discharged in a Chapter 7 Bankruptcy
A chapter 7 bankruptcy, is a good way to get back on your feet after some bad business decisions. Business debt can be overwheleming. Bankruptcy will help eliminate debts due to your business. If you personally guaranteed your business debts and are worried about creditors going after you and your assets, filing a chapter 7 can be a great tool. 
Types of Business debts that can be eliminated are:
- Credit Card Bills
- Lawsuit Judgments ( depends on what kind of judgment)
- Medical Debt
- Unsecured debt
- Debts to suppliers
- Debts to consultants
- Debts to accountants
- Debts to other professionals that you owe for some business transactions.
- Past Due Rent
- Obligations under contracts (ie. For rental equipment etc.)
- Personal Loans
- Promissory notes
You may have noticed that the debts listed above are all unsecured debts. You can only wipe away unsecured business debts in a Chapter 7 bankruptcy. Secured debts, on the other hand, are handled differently. A secured loan is a loan that is attached to the property as collateral. Lenders will take their property back because it wouldn’t be fair for you to keep property that is not paid for. If the loan is worth more than the collateral, the Bankruptcy Court allows you to wipe away this debt. speak with a lawyer to see how your business debt is categorized and if your debt can be wiped away in a chapter 7 bankruptcy.
Debts that Are Not Dischargeable in Chapter 7 Bankruptcy
Unfortunately, not all debts can be wiped away in Chapter 7 personal bankruptcy. It is important to determine what types of debt you have to see if filing a Chapter 7 bankruptcy is right for your financial situation. Some debts that are not dischargeable in bankruptcy are:
- Child support payments
- Alimony
- Court fines, penalties, and restitution
- Some tax debt
- Debts that may be deemed as fraud – making large purchases on your credit card and taking cash advances before filing
- Retirement loans from pension plans and 401(k)
- Student loans
- Debts arising from criminal or fraudulent activity
- EZ pass fines
How to File a Chapter 7 Bankruptcy for My Business
If you are looking to file a Chapter 7 bankruptcy for your business debt it is important to speak with a bankruptcy lawyer as soon as possible. Speaking with a bankruptcy lawyer can ensure that you follow the proper steps for closing your business. There are certain things that you can’t do if you plan to file bankruptcy. Some of these include selling and giving away any assets in the business. You will want to speak to a bankruptcy lawyer about how to wind down your business properly and how you can qualify for Chapter 7 bankruptcy. If you are in a partnership with a business you will also want to make yourself aware of how your business partners will be impacted if you file a Chapter 7 bankruptcy.
How We Can Help With Your Business Bankruptcy
If you see that you need to close your business in the foreseeable future, or already have close your business, we can help you. Our bankruptcy lawyers will guide you through your options to ensure that you close your business properly and don’t do anything that may impact your bankruptcy case. We can also advise you on different chapters of bankruptcy that may be available to your business. You can contact us by calling 973-979-9078 or emailing us at karra@klkbankruptcylawyer.com. Our bankruptcy attorneys help people and business in Staten Island, New York and New Jersey get rid of their business debt and start over.