Exempted and non-exempted debts in business bankruptcy

Depending on which chapter one uses to go about it, business bankruptcy implies being freed from some debts for many people. This option is normally taken up after every other solution to financial ruin, including pre-pack administration, has failed. As not all debts are exempted, many people are however misguided on the debts which are discharged and those which they will still have to pay.

The major debts which businesses facing bankruptcy are exempted from include credit card debts; accident claims; taxes amassed for more than 3 years; medical debts; leases and other unsecured bank loans. These are scraped off from the business’ records. However, in order to discourage unaccountability, the bankruptcy courts still require an individual to pay off some of the debts. The first of this kind is the student loans debt. This is compulsory considering the millions of shillings the government pumps into investing in college education through these loans. The other kind of debt which is non-dischargeable is child alimony and support. This is because the children are personal responsibilities.

Other debts which the court cannot exempt include recent tax defaults and any fines ordered in a court of law. The businesses which cannot opt for the pre-pack administration are normally advised to opt for chapter 11 or 13 when filing for business bankruptcy. These offer better terms in exemption and retention of the businesses.