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Buying & Selling a Business

What happens to warranty claims on products sold by a business before it went bankrupt?

TSL Written by the Treadstone Law team· Updated August 2026

Warranty claims on products the seller sold before its bankruptcy generally become claims against the bankrupt estate, like any other unsecured creditor claim, rather than automatically becoming the buyer's responsibility. A purchaser who later buys the underlying business or its assets doesn't inherit that pre-existing warranty exposure unless the purchase agreement specifically says the buyer is assuming it.

Because asset purchases from a receiver or trustee are typically structured so that unassumed liabilities stay behind with the seller or the estate, the purchase agreement should clearly exclude assumption of pre-existing warranty obligations if that's the intended deal, rather than leaving it ambiguous. Customers holding warranty claims from before the sale would ordinarily need to pursue the bankrupt estate rather than the new owner, though in practice some buyers choose to honour existing warranties anyway for customer-relationship or reputational reasons — if that's your plan, it should be a deliberate, documented business decision rather than something assumed to be a legal requirement.

Key takeaways

  • Pre-sale warranty claims generally become claims against the bankrupt seller's estate.
  • A buyer doesn't inherit that exposure unless the purchase agreement expressly assumes it.
  • Customers with existing claims would ordinarily need to pursue the estate, not the new owner.
  • Honouring old warranties voluntarily is a business choice, not a default legal obligation.
This is general information, not legal advice. It doesn’t create a lawyer–client relationship, and the rules can change. For advice on your situation, a Treadstone business lawyer can help.
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