Creditors can force a debtor into bankruptcy. Typically, individuals or businesses file for bankruptcy by their own choice. However, creditors may pursue the process of involuntary bankruptcy when they deem it worthwhile, for instance when debtors have substantial assets and are not repaying debt. In scenarios where there are less assets, an automatic stay will protect the debtor’s property. At the Bankruptcy Center of Illinois, our involuntary bankruptcy attorneys represent businesses and individuals in opposing these petitions and resolving them favorably. Debtors throughout DuPage County and nearby communities rely on our experience and tenacity to represent them in involuntary bankruptcy proceedings.
Bankruptcy offers a chance for a fresh start. Forgiving debts or helping organize debts provides individuals or businesses a way to move forward when facing financial difficulties. Creditors are also able to obtain repayment, depending on the debtor’s assets.
Involuntary bankruptcy usually occurs when creditors request a business or person enter into bankruptcy. In most cases, creditors request involuntary bankruptcy if they suspect they will not otherwise be paid. As a legal proceeding, this type of bankruptcy is relatively rare. A petition for involuntary bankruptcy is filed under Chapters 7 or 11 of the Bankruptcy Code. Creditors cannot trigger a provision under Chapter 12 or Chapter 13 bankruptcy.
Involuntary bankruptcy requires the creditor petition the court to begin proceedings. This petition includes an explanation that the creditor’s decision to pursue an involuntary bankruptcy is based on the debtor failing to make payments that are due. Other reasons may include an agent or receiver taking control of the debtor’s property within the last 120 days in order to enforce a lien.
An indebted party can file an objection to the petition for an involuntary bankruptcy. They will be required to show that the reasons set forth by the creditor for the bankruptcy are not justified. A judge will hear both the creditor and debtor present their case. The petition will be dismissed if the debtor’s position is persuasive.
If the petition is dismissed, the debtor may receive compensation for costs associated with the petition. If the judge keeps the petition, the case will move forward. An unopposed petition will move forward as though the creditor had filed for bankruptcy themselves.
There are procedural limits on creditors filing for involuntary bankruptcy. A single creditor is not usually allowed to file a petition for involuntary bankruptcy. The debt must meet a certain threshold, and the creditor is required to show that the debtor is not paying debts if they are due. Additionally, there should be less than 12 unsecured creditors for that debtor.
A debtor with more than 12 unsecured creditors presents a different scenario. Then, three of the creditors must join the bankruptcy petition. They must also, as a group, meet the threshold amount of unsecured debt. Unsecured debt is debt that is not attached to an asset.
Creditors also cannot pursue an involuntary bankruptcy petition if there is a dispute regarding the liability, or the amount. The Bankruptcy Code holds they cannot file the petition if the debt is contingent. This means the debt is based on an event that has not taken place yet.
Discuss the Details of Your Bankruptcy with an Attorney Helping People and Businesses Throughout DuPage County and Surrounding Areas
After looking over the specifics of your situation, a DuPage County involuntary bankruptcy lawyer will be able to assess appropriate next steps. The Bankruptcy Center of Illinois provides financial salutations for individuals and businesses undergoing the process of both voluntary and involuntary bankruptcy. We bring decades of combined experience to our legal advocacy and are prepared to diligently advocate on your behalf. Contact us today to learn more, we can be reached by telephone at (773) 993-0024 or fill out our online form. We provide a free consultation.