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Do all of a business's debts get erased by declaring Bankruptcy?

Home » Accounting » Business Bankruptcy » Do all of a business's debts get erased by declaring Bankruptcy?

Business debts get erased most of the time when declaring bankruptcy? A federal bankruptcy fully eradicates all debts owed by the business upon the declaration of bankruptcy. However there are cases in which debts must be repaid in some form, one way or the other, i.e. the business broke the law in their attempts to avoid creditors and thus the debts took place outside of the business arena of fair play.

Also, a debtor can be requested, by a creditor, to pay the full amount of the debt despite filing bankruptcy. This unusual situation most often happens when the debtor wants three things:

First, if the debtor has a personal relationship with the creditor and does not wish to isolate themselves from (or isolate themselves from a future business agreement with) the creditor.

Second, if the debtor is not alone in their debt, i.e. there is a co-signer that would, under other circumstances, be forced to bear the lion's share of the burden of the debt.

Third, if the secured creditor can take their collateral back from the debtor.

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