why were they in debt to other labels? what will happen now?
When you get a record deal, the money that you get yourself (cash advance), plus the promotion and marketing budgets etc, isn't your money, it's the labels money. They recoup what they spend on you from the profits from the sales. So if you don't sell enough records for them to recoup, you are then in debt to the record label.
What will happen now is that M.O.P will be able to release an album without worrying about past debts. With a reasonable budget and a couple of hits they should sell enough records to be alright.