Involuntary bankruptcy cases are rare, but they are an important aspect of bankruptcy law. Unlike most bankruptcy cases, involuntary bankruptcy is filed by the creditor, not the debtor, making it a powerful tool to use in court. To give you a better understanding of how involuntary bankruptcy works, a bankruptcy attorney at Groce & DeArmon explains the basics.
The Purpose of Involuntary Bankruptcy
Creditors usually enact involuntary bankruptcy when a debtor is not paying their debts but has the assets to make a payment. Basically, the debtor has the ability to pay but is failing to do so – or simply refuses. By enacting involuntary bankruptcy, the creditor forces the debtor to make their payments, allowing the creditor to recoup any lost assets.
Typically, involuntary bankruptcy cases are filed against businesses, not individuals. This is because businesses have more assets than individual borrowers, giving creditors a greater chance of recouping their money. Individual borrowers, on the other hand, have fewer assets so forcing them into bankruptcy would be ineffective for the creditor, not to mention dangerous for the borrower. Although involuntary bankruptcy cases against individuals are rare, they still occur, especially when the borrower is extremely wealthy. If a creditor files an involuntary bankruptcy case against you or your business, contact a bankruptcy attorney immediately.
The Involuntary Bankruptcy Process
The involuntary bankruptcy process starts with one or more creditors filing an involuntary bankruptcy petition at the bankruptcy court. Once the creditors file a petition, the debtor has a set amount of time to respond. During this time, the debtor should seek legal counsel from a bankruptcy attorney to ensure they can fight their case in court. Once the debtor responds, the bankruptcy court will hold a hearing. If the judge believes that the creditors acted in good faith and the debtor has failed to make their payments, the judge will proceed with the bankruptcy. However, if the judge finds the case in favor of the debtor, it will be dismissed and the creditor may have to pay for the debtor’s legal fees.
Contact a Bankruptcy Attorney
Involuntary bankruptcy is a complicated and highly-specialized area of law, making it difficult to fight on your own. If a creditor files an involuntary bankruptcy case against you or your business, it is vital that you consult a bankruptcy attorney. Talking with a bankruptcy attorney ensures that you have the greatest chance of winning your case and protecting your assets. To speak with an experienced bankruptcy attorney, contact Groce & DeArmon today.