What happens to partnership debts if the partnership is dissolved but hasn't paid its creditors?

Dissolving a partnership doesn't extinguish its debts. Existing creditors of the partnership remain entitled to be paid, and the partners remain personally liable, jointly and severally, for partnership debts incurred before dissolution, even after the partnership itself has stopped operating. Winding up a partnership means settling its affairs, which includes paying outstanding creditors, not simply walking away from what's owed.

Ontario's Partnerships Act sets out a general order for applying the partnership's remaining assets during winding up — outside creditors are generally paid ahead of amounts owed to partners themselves, such as partner loans, with any partner capital contributions and remaining surplus dealt with afterward. If the partnership's assets aren't enough to cover its debts in full, creditors can generally pursue the individual partners personally for the shortfall, since the partners' unlimited liability doesn't end just because the partnership has been dissolved. This is one of the more serious consequences of the general partnership structure, and it's a strong reason for partners considering dissolution to deal with outstanding creditors properly and get legal advice on the wind-up process rather than simply stopping operations.