I closed my LLC. Why do I still owe the debts?

Because dissolving the entity does not cancel obligations you took on in your own name. Under 11 U.S.C. § 727(a)(1) a discharge is granted only to an individual, so entities do not receive one. Any debt you signed a personal guarantee for, co-signed, or charged to a personal account is yours individually, and it stays yours until it is paid, settled, or discharged in your own case.

Does the means test apply if my debts are mostly from the business?

11 U.S.C. § 707(b)(1) frames the abuse-based dismissal around an individual debtor whose debts are primarily consumer debts, defined in § 101(8) as debt incurred primarily for a personal, family, or household purpose. Where debts are primarily business debts, that provision does not reach the case by its own terms. Characterising your debt mix is a factual question, and a court can still dismiss for cause under § 707(a).

What if I never kept proper books for the business?

Raise it early with a lawyer. Under 11 U.S.C. § 727(a)(3), failing to keep or preserve recorded information from which financial condition or business transactions might be ascertained is a ground for denying a discharge, unless the act or failure was justified under all the circumstances. Section 727(a)(5) separately addresses a failure to explain satisfactorily any loss of assets. Reconstructing what you can, honestly, is the practical response.

What does it cost to file?

The statutory Chapter 7 filing fee is $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)), collected together with a $78 administrative fee (Bankruptcy Court Miscellaneous Fee Schedule, Item 8) and a $15 trustee surcharge (Bankruptcy Court Miscellaneous Fee Schedule, Item 9). For Chapter 13 the statutory filing fee is $235 (28 U.S.C. § 1930(a)(1)(B)), with a $78 administrative fee (Bankruptcy Court Miscellaneous Fee Schedule, Item 8). Attorney fees are separate and vary.

Can I still be self-employed while in a repayment plan?

11 U.S.C. § 1304(a) treats a debtor who is self-employed and incurs trade credit in the production of income from that employment as engaged in business. Section 1304(b) provides that, unless the court orders otherwise, such a debtor may operate the business, subject to limitations under sections 363(c) and 364 and any conditions the court prescribes, and § 1304(c) imposes reporting duties.

Will unpaid business taxes go away?

Not necessarily. 11 U.S.C. § 523(a)(1) excepts from discharge taxes of the kind and for the periods specified in § 507(a)(3) or § 507(a)(8), taxes for which a required return was not filed or was filed late within the period the statute describes, and taxes the debtor fraudulently returned or willfully attempted to evade. Court guidance also lists most taxes among debts that commonly survive a discharge. Tax treatment is fact-specific.

Businesses & bankruptcy

Personal Bankruptcy After Your Business Closed

Closing a business does not itself discharge debts you owe as an individual. Under 11 U.S.C. § 727, only an individual receives a discharge, so shutting down an LLC or corporation leaves any debt you personally signed for with you. A personal bankruptcy case addresses those debts, and where your debts are primarily business rather than consumer debts, the § 707(b)(1) dismissal provision does not reach the case by its own terms.

Key points

Dissolving an LLC or corporation is not bankruptcy, and 11 U.S.C. § 727 grants a discharge only to an individual debtor.
A debt you signed a personal guarantee for is a debt you owe individually, which is what a personal bankruptcy case addresses.
The § 707(b)(1) presumed-abuse dismissal applies to an individual debtor whose debts are primarily consumer debts, defined by 11 U.S.C. § 101(8) as incurred primarily for a personal, family, or household purpose.
Under 11 U.S.C. § 727(a)(3) and (a)(5), missing business records or an unexplained loss of assets can be grounds for denying a discharge.
Your interest in the closed business, its receivables, and its remaining equipment are property interests that must be disclosed under 11 U.S.C. § 541.

A business closing rarely ends cleanly. The entity stops operating, but the landlord, the equipment lender, the SBA lender, and the credit card issuer are all still calling you, because at some point you signed personally. This page explains how a personal bankruptcy case treats what is left over, and the one rule that makes these cases different from an ordinary consumer filing.

What actually happens to debts when the business closes?

Closing or dissolving a company is a state-law event, not a bankruptcy. It ends the entity's operations; it does not end anyone's obligations. Under 11 U.S.C. § 727(a)(1), a court grants a discharge unless the debtor is not an individual, so corporations, partnerships, and LLCs do not receive discharges at all. Official district guidance makes the same point: bankruptcy cases filed by corporations, partnerships, and LLCs are governed by very different chapters and rules than cases filed by individuals (U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter: What can Bankruptcy do for you? What will it do to you?). What survives the closing is anything you owe in your own name. That commonly includes trade accounts you opened personally, a lease you co-signed, an equipment note, a line of credit, and business charges on a personal card. Those are individual debts, and an individual bankruptcy case is the proceeding that addresses individual debts.

Why does a personal guarantee follow you after the business is gone?

A personal guarantee is a promise you made in your own name that a lender can enforce against you if the company does not pay. When the company stops paying, the lender turns to the person who signed. Nothing about winding up the entity cancels that promise, because the promise was never the entity's. In a personal bankruptcy case, a debt you owe under a guarantee is listed like any other debt you owe, and the discharge under 11 U.S.C. § 727 reaches it unless one of the exceptions in 11 U.S.C. § 523 applies. Several of those exceptions matter here: debts obtained by false pretenses, a false representation, or actual fraud, and debts arising from a materially false written statement about your financial condition that the creditor reasonably relied on, are excepted under § 523(a)(2). Loan applications and financial statements you gave a lender are exactly the documents that provision addresses.

Guarantees are individual obligations, so they are listed on your personal schedules.
A lien on collateral can still be enforced after a discharge even where personal liability ends (U.S. Bankr. Ct. M.D. Ala., Consumer Pro Se Debtors Guide).
Written financial statements you gave a lender are the documents 11 U.S.C. § 523(a)(2)(B) addresses.

What changes the answer in a case like this?

The single largest variable is the mix of your debts. Under 11 U.S.C. § 707(b)(1), the court may dismiss a Chapter 7 case, or with the debtor's consent convert it, only where the case was filed by an individual debtor whose debts are primarily consumer debts and the court finds granting relief would be an abuse. Consumer debt is defined in 11 U.S.C. § 101(8) as debt incurred by an individual primarily for a personal, family, or household purpose. Debt taken on to run a business is not incurred for a personal, family, or household purpose, so it commonly falls outside that definition. Other variables include whether the entity was a sole proprietorship or a separate company, whether you kept books, whether assets left the business before filing, and whether tax obligations are in the mix. Income level alone is not the whole picture.

Two debt characterisations, two different paths through § 707(b)
Question	Primarily consumer debts	Primarily business debts
Definition applied	11 U.S.C. § 101(8): incurred primarily for a personal, family, or household purpose	Debt incurred to operate or finance a business
§ 707(b)(1) dismissal for abuse	Available to the U.S. trustee, trustee, or a party in interest	Provision addresses debtors whose debts are primarily consumer debts
Dismissal under § 707(a) for cause	Available	Available
Discharge exceptions in § 523	Apply	Apply

What does federal law actually say about business debtors?

Four provisions do most of the work. 11 U.S.C. § 727(a) directs the court to grant an individual debtor a discharge unless a listed ground applies. 11 U.S.C. § 707(b)(1) frames the abuse-based dismissal around an individual debtor whose debts are primarily consumer debts, and § 101(8) supplies that definition. 11 U.S.C. § 541 brings the debtor's interests in property into the estate broadly, which includes an ownership interest in the closed company, uncollected receivables, and equipment still in your garage. For a repayment plan, 11 U.S.C. § 1304(a) states that a debtor who is self-employed and incurs trade credit in the production of income from that employment is engaged in business, and § 1304(b) allows such a debtor to operate the business subject to court limits. Eligibility to be a debtor at all is set by 11 U.S.C. § 109. None of these turn on how recently the business closed.

Where do state and local rules change things?

Federal law sets the chapters, the discharge, and the abuse standard, so the core of this page is the same in every state. Two things are not. First, exemptions, which determine what property you keep, are heavily state-specific, and district guidance stresses that exemptions are not automatic and must be claimed on Schedule C: The Property You Claim as Exempt (Official Form 106C) (Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals). Business tools, a work vehicle, and receivables interact with those state rules in ways worth checking on your state page. Second, local practice varies by district: filing locations, local rules, and required local forms differ (Bankr. W.D. Ky. official guidance — Guide to Filing Bankruptcy without an Attorney; Bankr. D. Mass. official page — FAQs for Debtors). Alabama and North Carolina use bankruptcy administrators rather than United States trustees, which official instructions note throughout.

What does this look like in practice?

A common shape: the company stops trading, the bank sweeps the operating account, and within weeks a lender sues on the guarantee and a judgment leads to a garnishment. Filing a petition generally triggers a stay of collection activity. As the District of Maryland puts it, filing the petition automatically prevents, or stays, debt collection actions against the debtor and the debtor's property, and while the stay remains in effect creditors cannot bring or continue lawsuits, make wage garnishments, or even make telephone calls demanding payment (Bankr. D. Md. official page — Legal Overview). Expect the trustee to ask what happened to the business. Under 11 U.S.C. § 727(a)(5), a debtor who fails to explain satisfactorily any loss of assets or deficiency of assets to meet liabilities can be denied a discharge. In a typical Chapter 7 case a discharge could come four to six months after filing (Bankr. D. Md. official page — Legal Overview).

What documents and information are involved?

Business records matter more here than in an ordinary consumer case. Under 11 U.S.C. § 727(a)(3), concealing, destroying, falsifying, or failing to keep recorded information, including books, documents, records, and papers from which financial condition or business transactions might be ascertained, is a ground for denying a discharge unless the failure was justified under all the circumstances. Statement of Financial Affairs for Individuals Filing for Bankruptcy (Official Form 107) asks directly about lawsuits within the year before filing, property repossessed, foreclosed, garnished, attached, seized, or levied, property stored elsewhere, and property you hold for someone else (Bankr. E.D. La. official guidance — Chapter 7 Form Packet). Line 6 of that form asks whether your debts are primarily consumer debts, citing § 101(8). Chapter 7 filers also complete Chapter 7 Statement of Your Current Monthly Income (Official Form 122A-1). Gather bank statements, tax returns, the entity's formation and dissolution paperwork, loan files, and every guarantee you signed.

Entity formation, operating agreement, and dissolution filings
Business and personal bank statements, plus the last several years of tax returns
Loan agreements, security agreements, and every personal guarantee
Records of assets sold, transferred, or returned as the business wound down
Any lawsuit, judgment, garnishment, or levy paperwork

What is worth asking a lawyer about this situation?

Business-debt cases carry issues a consumer case usually does not, and they are the issues most worth paid advice. Official court materials are direct that clerks cannot give legal advice, and that you should have an attorney review your decision to file and the choice of chapter (U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy). If you use a debt relief agency, 11 U.S.C. § 527 requires specific written disclosures, including that all assets and liabilities must be completely and accurately disclosed. Useful questions to bring: how my debts are characterised under § 101(8) and what evidence supports that; whether any transfer during the wind-down could be challenged under § 727(a)(2); whether unpaid business taxes fall within § 523(a)(1); how state exemptions apply to tools, a work vehicle, and receivables; and whether a repayment plan fits better than liquidation.

Frequently asked questions

I closed my LLC. Why do I still owe the debts?: Because dissolving the entity does not cancel obligations you took on in your own name. Under 11 U.S.C. § 727(a)(1) a discharge is granted only to an individual, so entities do not receive one. Any debt you signed a personal guarantee for, co-signed, or charged to a personal account is yours individually, and it stays yours until it is paid, settled, or discharged in your own case.
Does the means test apply if my debts are mostly from the business?: 11 U.S.C. § 707(b)(1) frames the abuse-based dismissal around an individual debtor whose debts are primarily consumer debts, defined in § 101(8) as debt incurred primarily for a personal, family, or household purpose. Where debts are primarily business debts, that provision does not reach the case by its own terms. Characterising your debt mix is a factual question, and a court can still dismiss for cause under § 707(a).
What if I never kept proper books for the business?: Raise it early with a lawyer. Under 11 U.S.C. § 727(a)(3), failing to keep or preserve recorded information from which financial condition or business transactions might be ascertained is a ground for denying a discharge, unless the act or failure was justified under all the circumstances. Section 727(a)(5) separately addresses a failure to explain satisfactorily any loss of assets. Reconstructing what you can, honestly, is the practical response.
What does it cost to file?: The statutory Chapter 7 filing fee is $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)), collected together with a $78 administrative fee (Bankruptcy Court Miscellaneous Fee Schedule, Item 8) and a $15 trustee surcharge (Bankruptcy Court Miscellaneous Fee Schedule, Item 9). For Chapter 13 the statutory filing fee is $235 (28 U.S.C. § 1930(a)(1)(B)), with a $78 administrative fee (Bankruptcy Court Miscellaneous Fee Schedule, Item 8). Attorney fees are separate and vary.
Can I still be self-employed while in a repayment plan?: 11 U.S.C. § 1304(a) treats a debtor who is self-employed and incurs trade credit in the production of income from that employment as engaged in business. Section 1304(b) provides that, unless the court orders otherwise, such a debtor may operate the business, subject to limitations under sections 363(c) and 364 and any conditions the court prescribes, and § 1304(c) imposes reporting duties.
Will unpaid business taxes go away?: Not necessarily. 11 U.S.C. § 523(a)(1) excepts from discharge taxes of the kind and for the periods specified in § 507(a)(3) or § 507(a)(8), taxes for which a required return was not filed or was filed late within the period the statute describes, and taxes the debtor fraudulently returned or willfully attempted to evade. Court guidance also lists most taxes among debts that commonly survive a discharge. Tax treatment is fact-specific.

Sources

11 U.S.C. § 727 — Discharge · official source
11 U.S.C. § 707 — Dismissal of a case or conversion to a case under chapter 11 or 13 · official source
11 U.S.C. § 101 — Definitions · official source
11 U.S.C. § 523 — Exceptions to discharge · official source
11 U.S.C. § 541 — Property of the estate · official source
11 U.S.C. § 1304 — Debtor engaged in business · official source
11 U.S.C. § 109 — Who may be a debtor · official source
11 U.S.C. § 507 — Priorities · official source
11 U.S.C. § 527 — Disclosures · official source
Bankr. D. Md. official page — Legal Overview
U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter: What can Bankruptcy do for you? What will it do to you?
U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy
Bankr. E.D. La. official guidance — Chapter 7 Form Packet
Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals
U.S. Bankr. Ct. M.D. Ala., Consumer Pro Se Debtors Guide
Bankr. W.D. Ky. official guidance — Guide to Filing Bankruptcy without an Attorney
Bankr. D. Mass. official page — FAQs for Debtors
28 U.S.C. § 1930(a)(1)(A), (f)(1)
28 U.S.C. § 1930(a)(1)(B)
Bankruptcy Court Miscellaneous Fee Schedule, Item 8
Bankruptcy Court Miscellaneous Fee Schedule, Item 9

By Antonio G. Jimenez, Esq. · Florida Bar No. 21022

Sources verified July 27, 2026 · How we verify

Every figure on this page is drawn from a primary legal source and checked against our canonical legal database before publication. Bankruptcy.law is not a law firm and does not provide legal advice.

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