Involuntary Bankruptcy 

Involuntary Bankruptcy

An involuntary bankruptcy Chapter 7 or Chapter 11 can be filed against another person or a business if that person or business fails to pay debts as they become due. A creditor owed $14,425 debt (when there are less than 12 creditors) or at least 3 creditors owing total of $14,425 debt (when there are more than 12 creditors) could commence an involuntary bankruptcy by filing the involuntary bankruptcy petition with the bankruptcy court. The debtor has 20 days to respond. The court thereafter will determine if the petition is filed in good faith and that bankruptcy could go forward and in what chapter. An involuntary bankruptcy could be used instead of the regular civil case action when debtor has recently transferred or is about transfer assets which renders the debtor insolvent and hinders the creditor from collecting the debts. Involuntary bankruptcy is very much similar to filing a civil action again the debtor. The debtor has 20 days to respond and contest the validity of the petition. If the court determines that the filing is valid, then the bankruptcy will be commenced with full force. A creditor also can prevent a foreclosure or seizure of asset by another creditor while the involuntary bankruptcy is in process even though the debtor has already filed 3 bankruptcy petitions, and exhausted its automatic stay to protect his asset. Under the right circumstances, involuntary bankruptcy could provide significant recovery and prevent years of costly and futile litigation if the debtor is about to transfer or lose significant value of the asset.