Some debtors want to know what is involuntary bankruptcy when they are faced with this legal process. This process occurs when an individual or a business has not paid their debts to creditors. The creditors then file a request that the debtor should declare bankruptcy. The creditors often choose this legal alternative because they believe that forcing a debtor to file is the only way they will be able to recoup some of the debt that the debtors owe them. If the bankruptcy courts grant this request, the debtor will have to file for bankruptcy.
Creditors Often Object To Involuntary Bankruptcy
It is not uncommon for debtors to object once they learn what is involuntary bankruptcy. In fact, if a creditor is trying to force a debtor to declare bankruptcy, the debtor can file an objection notice with the court within 20 days of receiving the petition. If a debtor files an objection, the courts will schedule a hearing. During this hearing, both parties will present their cases to the court. If the debtor should win the case, the debtor will be eligible to collect court related fees from the creditor, including lawyer fees and other costs.
The Requirements for Involuntary Bankruptcy
The first thing that debtors should know is that creditors cannot automatically force them to file for bankruptcy. Minimum amounts must be met for both debt and creditors before a creditor can file a petition. However, these numbers can vary depending on whether the debtor is an individual or a business.
The Chapter of Bankruptcy for Involuntary Bankruptcy
Creditors can not file this type of bankruptcy under Chapter 13. So, creditors must petition all debtors under Chapter 7. And, creditors will petition a business under Chapter 7 liquidation. This means that a debtor will pay the creditor with funds from liquidated assets. The courts will distribute money that is generated through the liquidation process among creditors via formulas that the bankruptcy court creates. The court will then forgive the remaining debt balance.
If you received notification from the bankruptcy court that one or more of your creditors filed a petition against you, consult with an experienced bankruptcy attorney. The attorney will advise you on the best way to proceed with your case.
Are you facing an involuntary bankruptcy from one or more of your creditors? Contact us to schedule a consultation.