Can Business Expenses Paid with Personal Credit Cards Be Discharged in Personal Bankruptcy?

Personal credit card debt incurred to pay business obligations can be discharged as part of a personal Chapter 7 bankruptcy. But the Bankruptcy Trustee would have the right to review the business records of the LLC to determine whether the debtor’s ownership interest in the LLC has value that can be used to pay the debtor’s personal creditors through the bankruptcy case.

Cash advance loans made for business purposes may be dischargeable provided that such loans were not incurred with the intention of having the same discharged through the bankruptcy. The Trustee may look at the amount of the loans, the timing of the loans and the use of the loan proceeds to determine whether or not they will be discharged.

Obligations incurred by members of an LLC resulting from a personal guarantee of business debt is generally dischargeable in a personal chapter 7 case. Debt owed by the LLC would not be effected by the discharged issued to the members, however. And if the LLC has no assets and is no longer in business, creditors of the LLC will have little recourse when attempting to obtain payment from the entity itself.

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