While bankruptcy is mostly perceived by debtors that run into financial difficulties as a form of debt relief, it can also be used to the advantage of the creditors. An involuntary bankruptcy is the procedure that is filed by creditors who are attempting to collect their money. These are usually creditors that know that their debt is not going to be discharged by the bankruptcy action.
In the majority of cases an involuntary bankruptcy is put against a business. This is when a creditor knows that a business has assets which, if were sold, the creditors would get their money but the debtors are not prepared to do so. In order to achieve this, creditors push the debtor into going bankrupt.
There are very rare occasions where this can be done against individuals. The issue here is that most personal debtors don’t have a lot of assets so the purpose of an involuntary bankruptcy would serve no purpose. In order for an involuntary bankruptcy to take place, one or more of the creditors has to go to the bankruptcy courts and file a petition.
Once the petition has been put in place the business owing the debt has 20 days to respond. If the business does not respond, the court will then most likely let the bankruptcy go ahead and the business debtor now has no choice but to become a part of this action. Any business owner that finds themselves in this particular circumstance should seek out a qualified and experienced bankruptcy attorney to assist them.
Contact us today for a free consultation on how we can help your business with bankruptcy.