Can You Be Forced Into A Bankruptcy Against Your Will?
Filing a bankruptcy is just like filing any other kind of lawsuit, in one major way: It’s your choice whether to file for bankruptcy or not. Certainly, circumstances may dictate that you need to file, but ultimately, it is your choice to file or not to file.
Except that there is one, rare situation, where it isn’t your choice: An involuntary bankruptcy. Yes, on certain, limited occasions, creditors may force you into bankruptcy even if you don’t want it. But not to worry—this doesn’t happen very often.
How You Can be Forced into Bankruptcy
For this to happen, if you or your business has at least 12 different creditors, then any three creditors who are owed at least $16,750 must petition to force you into bankruptcy (that dollar figure is adjusted regularly). If you do not have 12 or more creditors, a single creditor owed that amount, can petition to force you into bankruptcy.
That means that for most debtors, the involuntary bankruptcy will require the creditors to agree to file the involuntary bankruptcy.
Creditors can only force you into a Chapter 7 bankruptcy—not a Chapter 13 bankruptcy.
Why It’s Unlikely to Happen
However, for most people, involuntary bankruptcy is not a huge concern, and it is unlikely to happen.
Creditors only want to compel someone into bankruptcy, who actually has assets to pay the debt. There would be no point in forcing someone into bankruptcy, just to have the creditors own debts discharged for little to no money.
Additionally, many creditors stand to gain different things in a potential bankruptcy. That means that getting 3 creditors to agree may be difficult. Some creditors may see it as more advantageous to push you into bankruptcy than others might. Many creditors would prefer to just pursue the average individual on their own, rather than get you into a bankruptcy, where whatever assets you do have, will have to be shared amongst all your creditors.
Objecting to the Filing
Once the involuntary bankruptcy is filed, the debtor can object to the filing, in which case the court could, if it agrees with the debtor, dismiss the case, or the debtor may opt to just go along with the filing, and proceed with the bankruptcy as if the debtor had filed the case in the first place.
Business Involuntary Bankruptcy
If a business is forced into bankruptcy, it usually does not have to cease operations. The creditor may ask for a trustee to be appointed, but that request can be opposed, and the court can deny that request, allowing the business to continue operations as normal during the course of the bankruptcy.
Business involuntary bankruptcy can be particularly risky for creditors. Should creditors force a company into bankruptcy, only to have the court dismiss the bankruptcy, the creditors can end up owing the business’ attorneys fees and costs. Additionally, they may even be liable for additional damages, such as lost income from the business that it incurred because of the bankruptcy, or other financial damages that stemmed from being forced into bankruptcy.
Contact the Boca Raton bankruptcy attorneys at the Law Offices of Stephen Orchard at 561-455-7961 today if you have questions about your rights in bankruptcy court.
Source:
law.cornell.edu/uscode/text/11/303
