Will I have to pay a debt that I owe to a company that has filed for bankruptcy?

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UPDATED: Jul 16, 2021

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Written By: Jeffrey JohnsonUPDATED: Jul 16, 2021Fact Checked

If you owe money to a bankrupt company, whether for a debt, line of credit, purchase, or any other past financial transaction, you are obligated to pay that debt even if the company in question files for bankruptcy. The fact that the company is bankrupt does not eliminate your debt, because the company’s financial status does not alter the status of your transaction.

Do I need to pay my debt to a bankrupt company?

The argument is sometimes made that the company, having undergone liquidation, does not technically exist anymore, and thus has no power or reason to collect on past debts such as the money you owe to them. This is false, since the filing of bankruptcy, while it may officially liquidate the company in legal terms, does not erase its financial transactions from existence.

The company’s financial matters will likely fall into the hands of a bankruptcy trustee, who will be responsible for taking the company’s liquidated assets and using those to pay off its creditors. The money you owe to the company is considered its property and its asset, and is expected to be used to pay those creditors.

Your failure to pay the debt will still result in collection actions, likely by third party agencies. Once the money is collected from you, it will be used by the trustee to pay down the outstanding debts of the company.

You should not ignore the debt you owe. If you are not sure exactly how to pay it because the company no longer exists, you will want to attempt to get in touch with a company official or with the bankruptcy attorney who is representing the company so you can ensure you are able to pay the debt before a trustee makes a claim against you. A lawyer can also help you to understand and fulfill your obligation to pay your debt.

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

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