Can Personal Bankruptcy Discharge Business Debts
Delancey Street offers a money back guarantee for debt relief services.
CAN YOU REALLY DISCHARGE BUSINESS DEBT IN PERSONAL BANKRUPTCY
Yes, sometimes you can in fact discharge business debt through your personal bankruptcy. If you’re a small business owner who’s personally liable for certain debt you took on, such as merchant cash advance debt, then a personal bankruptcy might help you get a fresh start. But guess what? It’s not as simple as it sounds – you need a strategy, and you can’t just do it nilly-willy. There are laws and procedures to this,
We can help you figure it out, because we’re DelanceyStreet.com – a top tier business debt relief company with a sister-law firm that understands the legal relationships between personal liability, business debt, and the potential for discharging those debts.
WHY THIS MATTERS
We see this scenario all the time: a business owner, stuck deep in MCA loans (yes, we’re talking about MCA lenders), credit card bills, equipment financing, and lease obligations. Suddenly, your personal finances are on the brink too – you’re underwater on all fronts. If you’re considering personal bankruptcy to handle what’s technically “business debt,” you have to ask: can personal bankruptcy truly wipe that slate clean? Many people often consider this as a way out.
Hint: sometimes yes, sometimes no.
Understanding the Basics
- 11 U.S.C. § 727
- 11 U.S.C. § 523
These are some of the main sections of the U.S. Bankruptcy Code that talk about dischargeable debts and exceptions to discharging debt in bankruptcy. For official info, check U.S. Courts on Bankruptcy or see the U.S. Department of Justice – U.S. Trustee Program.
Regardless of whether it’s a sole proprietorship, or you personally guaranteed your company’s debts, personal bankruptcy could help you get out of this situation and help you handle it. Chapter 7 can eliminate personal responsibility for certain business debts—like credit cards or merchant cash advances—assuming you meet means test requirements and the debt is truly unsecured.
POTENTIAL PENALTIES
If the court finds any sign of fraud, or if you tried to hide assets, there can be huge ramifications that will haunt you. You could face:
- Denial of Discharge under 11 U.S.C. § 727.
- Potential fines or even criminal liability if you lie to the court knowingly.
- Dismissal of your case, meaning you don’t get the fresh start you wanted and now you’re stuck with the business debt – a truly horrifying scenario.
The business debt you took on might also be non-dischargeable if it was incurred under false pretenses, or if you used personal guarantees in a way that the bankruptcy court deems sketchy. For example, if you use bankruptcy to get out of MCA debt, that can be an acceptable situation. If the trustee thinks you’ve done something shady, you could lose the entire benefit of bankruptcy protection. That’s why you need a top-tier approach.
CONSIDERING CHAPTER 7 VS. CHAPTER 13
Chapter 7 wipes out many unsecured obligations. But if you have assets, you risk losing them to liquidation.
Chapter 13 creates a repayment plan for the debt. If you have leftover personal responsibility for business debts, Chapter 13 can let you reorganize them into a new payment structure that works for you, and your business. Usually, the monthly payment is based on your disposable income, and after you complete the plan, the remaining eligible debts might be discharged.
So, regardless of the structure you choose, it’s crucial you understand which business liabilities get folded into your personal bankruptcy.
IMPLICATIONS IN EVERY SITUATION POSSIBLE
Look, if you’re a sole proprietor, the line between “personal” and “business” debts is blurred. If you’re a partner in a partnership, your liability could be personal for partnership debts. If you’re an LLC member who personally guaranteed an MCA lender’s contract, you might still face personal liability.
We see business owners who try to file personal bankruptcy, thinking all their merchant cash advance obligations magically disappear. But if the MCA lender used a confession of judgment, or if there’s a personal guarantee somewhere, it can complicate your discharge.
In some cases, your business is still on the hook—bankruptcy might only shield you personally, while the company’s obligations remain unless the company itself dissolves or does its own Chapter 7.
DEFENSE STRATEGY
At Delancey Street, we believe in vigorously negotiating your debts before, or even during, a bankruptcy scenario. Sometimes, a well-executed business debt settlement can complement personal bankruptcy. We:
- Review your entire financial picture. That means your personal liabilities, your business bank statements, your vendor debts, everything.
- Reach out to creditors to see if a settlement is possible. Lenders often prefer to cooperate rather than watch you file bankruptcy.
- Check for personal guarantees – because if the debt lacks a personal guarantee, you might not even need to list it in personal bankruptcy.
We’re dedicated to not only looking at the personal side of the debt you have, but also making sure the business can keep its doors open. We know it’s not just you at stake, it’s also your employees. We talk to lenders, we create payment plans, we strategize, and ultimately we revive your business so the debt isn’t holding you down.
HOW IT ALL COULD GET DISMANTLED
Imagine you file Chapter 7, thinking you’ll discharge the business debts. A trustee looks through your records, and guess what—there’s a suspicion you took out a recent MCA loan with no desire or intention of repaying the debt. Or maybe you transferred assets to your spouse’s name last month. Suddenly, everything will fall apart. The trustee files an objection to discharge the business debt. The judge has issues with your recordkeeping, and decides to refuse your bankruptcy. The whole discharge process will crumble, very fast.
That’s why you need a robust strategy from the get-go, so your entire structure doesn’t get dismantled by a single misstep.
STRATEGIES OF HOW WE’D DEFEND YOU
We can help you, by:
- Building evidence that you acted in good faith, and that you’re not trying to commit fraud.
- Negotiating with your business debt creditors to reduce the total owed, so your bankruptcy is less messy.
- Examining if your personal liability is legitimate or if the business debt can be challenged.
- Advising on whether Chapter 13 might be better, since it demonstrates a willingness to repay some portion of what you owe.
We can help you gather your business bank statements, your merchant cash advance agreements, your personal credit card statements, everything. Then we create a story that protects your best interests, and we go to court if needed to protect you.
We’re proud to say we offer a money back guarantee for MCA business debt relief services we offer. Our track record is built on transparency and open communication with lenders – they know we don’t play games, and we don’t take on clients who are looking to play games with lenders.
CAN PERSONAL BANKRUPTCY DISCHARGE BUSINESS DEBTS?
Delancey Street Offers a MONEY BACK GUARANTEE
You might feel trapped. You might feel like creditors are about to overwhelm your world. You might not realize that personal bankruptcy can—under some circumstances—wipe out certain business debts. This is a heavy topic that affects your future. This matters.
WHY THIS MATTERS
Business debts often follow you personally. Personal guarantees, MCA lenders, and business credit cards can result in constant creditor calls and legal threats. Lawsuits can destroy your personal credit. That’s not good for you or your family.
WHAT’S THE LEGAL FRAMEWORK?
Bankruptcy law in the United States is outlined in Title 11 of the U.S. Code. Sections like 11 U.S.C. § 523 list debts that might be excluded from discharge. When it comes to business debts, if you personally guaranteed them, creditors might pursue you even after your company closes. You should check resources like the U.S. Courts official website for more details.
PENALTIES AND POTENTIAL PITFALLS
- Judgments sting. Creditors can seize assets if a judgment is placed against you.
- Lawsuits cost. Litigating can drain your savings.
- Tax complications. The IRS wants its share. If there’s a discharge, the IRS might see it as taxable income. (See IRS.gov for guidance.)
THERE IS A SOLUTION
You can seek bankruptcy protection under Chapter 7 or 13. If you file Chapter 7, you might get a complete wipe of certain personal obligations. If you file Chapter 13, you might restructure those obligations to make them more manageable. But it depends on the nature of your business debt. It depends on how the debt was formed.
HOW DELANCEY STREET HELPS
We’re a top tier business debt relief company that offers a money back guarantee. We understand toxic debt. We handle negotiations with MCA lenders. We focus on achieving real outcomes, such as:
- Reduced balances
- New payment schedules
- Extended repayment periods
OUR DEFENSE STRATEGY
We negotiate. We speak to creditors using a careful step-by-step approach. We gather your contracts, statements, and all relevant data. We show them why a settlement is in everyone’s best interest.
We fight potential lawsuits. We argue that a payment plan is better than forcing you into a corner. We protect your assets. We reduce daily or weekly payments. We keep you afloat.
HOW THIS CAN UNRAVEL
If you wait too long. If you hide from creditors. If you decide to skip payments. Creditors might file lawsuits. Judgments might follow. Then you might face wage garnishments or frozen bank accounts. The risk is serious.
OUR STREAM OF CONSCIOUSNESS
Think about waking up tomorrow to a lien on your property. Think about your business bank account locked. Think about calls from angry lenders. This is a nightmare if you avoid the problem. But you can handle it by acting now.
SPECIFIC STRATEGIES WE USE
- Review of Contracts: We examine whether your personal guarantee applies.
- Negotiation of Reduced Sums: We approach lenders with data-driven facts.
- Payment Extensions: We fight for extended timelines, so your cash flow heals.
- Creditors’ Perspective: Lenders prefer receiving partial repayment over chasing you through courts.
WHAT’S INCLUDED WHEN YOU WORK WITH US
- Direct communication with your creditors
- Expert attorneys who understand business debt
- Ongoing support for your finances
- Backup plan if further legal issues appear