Chapter 11 Bankruptcy and Discharged Debts

Discharged debts (i.e., old debts that a debtor is no longer required by law to pay) offer business owners a chance to start over. Most, but not all, debts incurred prior to declaring bankruptcy are

dischargeable, including business debts, back rent, and credit card bills. The discharge operates as a permanent order to the debtor's creditors that prevents them from taking further legal action and communication with the debtor, including telephone calls, letters, and personal contacts.

Ultimately, the availability of discharge depends on the Chapter under which the bankruptcy proceedings are conducted (Chapter 11 in the case of most businesses), and whether the debtor is a person or organization. One rule which applies in all Chapters is that a debtor guilty of misconduct during the course of the bankruptcy proceeding will be denied discharge.

Non-Dischargeable Debts

The most common types of non-dischargeable debts include certain types of tax claims, debts not included by the debtor on the lists and schedules the debtor must file with the court, debts to governmental units for fines and penalties, debts for most government-funded or guaranteed educational loans or benefit overpayments, debts for personal injury caused by the debtor's operation of a motor vehicle while intoxicated, and debts for certain condominium or cooperative housing fees.