Lawyers say your $5,000 debt doesn't disappear when the company you owe goes out of business here's why Christy Bieber Sat, September 19, 2026 at 6:30 AM PDT 5 min read westend61/Envato Around 57% of households have some type of unsecured debt , including credit cards and personal loans. This debt can be a financial burden because borrowers must make monthly payments and cover interest. Once you've taken on debt, you're committed to paying it back. Otherwise, you could hurt your credit score and face collection activity. But what happens if the company you borrowed from runs into financial trouble and goes out of business? Does that mean your debt disappears? Must Read Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 6 ways to build wealth like a landlord without actually being one Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake. Here's what it is and 3 simple steps to fix it ASAP The tax breaks in Trump's 'big beautiful bill' expire after 2028. Here are 4 moves to make before the window closes Let's say, for example, that Ronald financed $10,000 in home repairs with a local construction company, but the company is now shutting its doors. Ronald still owes $5,000, so he's wondering if he still has to pay back this money or if the closure of the business he owes money to wipes his slate clean. Unfortunately for Ronald, experts agree that he's likely not just going to be able to walk away from the debt, despite the company he owes money to shutting down. Your duty to pay doesn't disappear While Ronald may have hoped he'd be off the hook once the construction company closed, that won't necessarily happen. "Generally, if you owe $5,000 to a company that goes out of business, you still have to pay it," Romy Jurado , a Florida business attorney, told Moneywise. "The debt doesn't simply disappear because the company closes. This is a common misconception." Jurado explained that your unpaid bill is an asset of the company, so the company could still try to collect as it goes through the shutdown process. If the business isn't in a position to collect the unpaid amount itself, it could transfer or sell the debt to someone else, like a collection agency. And if it's going through bankruptcy, the trustee could try to collect. And other experts agree. "You absolutely still have to pay back that $5,000," Stacy Kemp Ferrari , founder and managing partner at Kemp Law Group in Florida, told Moneywise. "The only question is who you're going to pay it back to." Unfortunately, Kemp explained that "filing for bankruptcy actually gives them more reason to aggressively hound you for payments, since those debts are valuable corporate assets they can use to make payments for their own debts." Story Continues There's a simple reason why the debt doesn't just disappear. As Michael Ziegler , an attorney...
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