What Is Discharged Under Chapter 11 Bankruptcy?
When filing for Chapter 11 bankruptcy protection, certain debts may be eligible for discharge. This means that a business owner is no longer required to pay her outstanding debt nor can a creditor attempt to collect it.
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Function
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Chapter 11 bankruptcy refers to a case filed under Chapter 11 of the U.S. Bankruptcy Code. Businesses, including a sole proprietorship, are eligible for bankruptcy protection under Chapter 11.
Benefits
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When a debt is discharged, the court issues an injunction that prevents the creditor from attempting to collect on a debt. Once the debts are discharged, the debtor is no longer required to pay back the creditors.
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Dischargeable Debts
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Business loans, credit card bills, back rent and similar business-related debts typically can be discharged in a by a company under Chapter 11 bankruptcy proceeding.
Debts Not Discharged
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Tax liabilities, government-imposed fines and penalties, government loans and past-due employee salaries typically are not eligible for discharge.
Personal Debts
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A business owner's personal debts are not eligible for discharge in a Chapter 11 bankruptcy. The owner must file for bankruptcy separately for his individual debts.
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