I am personal guarantor for loans in the small businees I own. Are they dischargeable in a personal bankruptcy?

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I am personal guarantor for loans in the small businees I own. Are they dischargeable in a personal bankruptcy?

Asked on May 18, 2009 under Bankruptcy Law, New York

Answers:

S.J.H., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

These debts in all likelihood,  will be dischargeable in a personal Chapter 7 bankruptcy unless they are secured by some colalteral such as a building etc. or if you signed a contract which deems these debts non-dischargeable.  If you file Chapter 13 these debts will not be discharged buit rather will be part of a plan to pay them off within a period of time.  If you are filing persoanl bankruptcy I suggest that you cease the business as well because if the business racks up more debt after the discharge, you will be responsible for these.

J.M.A., Member in Good Standing of the Connecticut Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

the answer depends on a number of different things, namely whether you qualify for bkcy and/or what form of bkcy your are filing.  Generally, you may discharge personal debts in bkcy.  I am not sure whether there are any lawsuits pending with respect to the loans - i.e. if you obtained a loan by fraud, the debt may not be dischargeable.  However, if this is a simple loan agreement that you are not able to pay and you are filing for bkcy protection, then the loan should be discharged.  The small business will remain on the hook for the loan.


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