What happens to the loan when you sell your 1031 exchange property?

[Anshika Rani]

Hello Everyone,

New to the forum but not new to real estate :). We are rehabbing a property right now for flip and putting in almost $40,000 into it as a loan through one of our own sister companies with an actual loan agreement and interest terms. 

What happens to this loan that we take for the rehab after we sell the property before we do the 1031 exchange? Do we have the ability to pay out this loan from escrow once the property sells? 

Or 

Do we have to keep paying that loan out of our own pocket even when we do the 1031 exchange? 

So for example if the property is bought for $50,000 and we put in $40,000 into it now on the cost basis is around $90,000. But if we sell the property for 180 K. We need to pay back the lender. Can we pay back the lender from the sale price and still buy the next property for 180K minus 40K that is 140K or does the new property has to be 180K regardless of the fact that we have to pay pay the lender or not?

Let me know if further clarification is needed. Thanks.