7 Laws That Redirect Your Collection Defense (2026)
Business Debt Restructuring in Montana

Exits have paperwork.

A Montana owner closing, selling or shedding a business discovers that obligations end on forms, not on intentions, and federal law writes most of those forms.

Discharge in Chapter 7 and Its Limits

Bankruptcy exists to discharge honest individual debtors and grant a fresh start. The debtor has no liability for discharged debts, though the right is not absolute, some debts fall outside it, and partnerships and corporations take no discharge in this chapter at all. The federal court explanation of the chapter seven discharge states the individual only rule first, before any comfort, and counsel plans a company exit around that boundary rather than through it.

Excluded debts include support obligations, specified taxes, government backed education loans, willful and malicious injury, intoxicated driving injuries and criminal restitution, while fraud, fiduciary defalcation and further willful injury survive only with a prompt filing and a prevailing judgment from the creditor, a distinction counsel calendars early. Trustees tend to raise reaffirmation at the creditors meeting itself, before the owner has decided anything, and the agreement, which must precede discharge, be written, be filed and carry extensive disclosures, preserves personal liability the discharge would otherwise end. Reaffirmation agreements favor the creditor holding the collateral. They are drafted that way, though local practice on timing varies more than the national figures suggest.

Counsel lists the debts, tests each exception and files only after the review is complete. A lien rides through discharge where the security interest endures, so the exit plan treats collateral and liability as distinct questions. The discharge order arrives sixty to ninety days after the creditors meeting, absent objection.

Waiting Periods After a Prior Bankruptcy

An earlier case casts a long shadow. Seldom does a second filing proceed without reference to the first, and the waiting periods turn on the chapter numbers then and now, measured from filing date to filing date.

The federal court guidance on prior bankruptcy effects sets the combinations: eight years from a prior seven or eleven to a new seven, four from a prior seven to a new thirteen, six from a thirteen that paid less than seventy percent to a new seven, two between thirteens. The prior case is closed. Its dates remain open. I have stopped assuming any owner knows the prior chapter number. That is what the waiting periods measure. The dates decide.

Settling SBA Balances After Collateral Liquidation

The SBA compromise comes last. The agency form may be submitted only after liquidation of all collateral under agency guidelines, with financial statements from every person and entity seeking relief, and disaster era loans are excluded from forgiveness through this route.

The agency compromise form page states the sequencing without apology. The offer sits in the agency queue the way winter wheat sits under snow: alive, unhurried, invisible. What the agency accepts, or returns, turns on documentation rather than persuasion. Liquidation first, documentation second, and the offer only when both are complete.

Credit Reports After Resolution

Consider a hypothetical lender pulling the business report a year after resolution. Bureaus compile creditor, vendor, public record and collection data, and the report shows judgments, filings and liens alongside payment handling on commercial credit, with recency, frequency and amount shaping the score (the scoring models, which no bureau explains in full, weigh all three at once).

The score is the business reputation reduced to a number. The bureau account of business credit reports confirms that checking the report reveals where the business stands before the next application tests it, and an extremely slow correction process punishes the owner who files the resolution papers and never verifies the record. Checking the reports is basic work and it should be done, since the trade creditor who checks next quarter will never know how close the file once came to collapse.

Liens That Survive the Closing

Not every lien dies with the debt it secured. The enacted rule continues the security interest despite sale or disposition unless the disposition was authorized free of the interest, reaching identifiable proceeds where the original collateral is gone. The enacted continuation rule states the uniform principle, and counsel confirms the Montana version before the owner treats closing as clearing.

The closing binder proves nothing to the filing office. Most closings happen tired. I understand tired. The lien was filed in order to survive exactly this moment. Counsel searches the record before the closing funds move.

Tax on the Forgiven Balance

The settlement check clears in June. The tax bill arrives the following April. Forgiveness is income, counted as ordinary, unless a bankruptcy or insolvency exclusion applies within its requirements, and excluded amounts reduce attributes rather than vanishing.

The Internal Revenue Service discussion of canceled debt orders the rule before the exceptions, and the tax attaches at settlement, not at filing, which surprises owners every spring. It surprises me that it still surprises. An extremely partial exclusion still beats an unclaimed one, and counsel claims it on the return with attributes reduced to match. The exclusion must be claimed on the return, with attributes reduced to match.

The Quiet You Must File to Receive

And no private agreement creates the bar. A filing suspends judgments, collection activity, foreclosure and repossession on prepetition claims by operation of law, with stated exceptions, while settlement by itself suspends nothing. The federal court account of Chapter 11 reorganization describes the suspension and the motions that test it, from stay relief to cash collateral to unexpired leases.

You file the petition and the phone stops. Whether a given court grants early relief from the stay is beyond prediction. The docket shows an almost pastoral indifference to urgency, and counsel negotiates and resolves within the quiet rather than admiring it.

Delancey Street offers a free confidential initial review for business debt distress, and the Delancey Street account of its settlement work describes a settlement company rather than a law firm, so legal questions travel to independent counsel under a separate engagement. The objective is to ensure the discharge analysis, the lien record and the tax posture are reviewed and analyzed as one file, and to ensure the exit closes the file rather than abandoning it.

Resist the urge to stop paying attention once the petition is filed, even briefly, since the schedules, the statements and the operating reports demand accuracy under oath. Simply review, sign and file what counsel prepares, and nothing else. A first call costs nothing and assumes nothing; it starts with the ending, and consultation is where the paperwork begins.

The building empties, the paperwork remains, and the owner who finished it first leaves lightest.