Involuntary Bankruptcy: What Is It?
If you’ve gathered some debt and you’re not currently able to pay your creditors, hiring a reputable and experienced bankruptcy lawyer in El Cajon, CA and filing a suitable form of bankruptcy is the best way to regain your financial independence and security. However, not all debtors choose to go down this road and instead keep postponing their bankruptcy and putting off paying their creditors. This is when involuntary bankruptcy can come knocking on your door.
What is involuntary bankruptcy?
This bankruptcy represents a legal procedure request at the hand of the creditors. This is how they ask the legal system that one of their debtors goes into bankruptcy without filing for one on their own. Creditors usually request involuntary bankruptcy if they believe they would otherwise not receive recompense for the debt they’re owed.
In order to force a debtor into bankruptcy, creditors have to request legal action from the court. Involuntary bankruptcy usually occurs if the creditors are aware that their debtor has the financial capacity to repay the debt, but refuses to repay it.
How does this type of bankruptcy work?
The main difference between voluntary and involuntary bankruptcy is that the former requires the debtor to file for bankruptcy of their own will, while the latter requires one of their creditors to request they file bankruptcy at the court. In order to begin involuntary bankruptcy, the creditors have to first petition the court to start the process.
The creditor petitioning for bankruptcy has the ability to initiate bankruptcy by filing a document known as the involuntary petition to the court. In this document, the creditor clarifies the reasons for filing such a document and brings forth the necessary documents that prove the necessity of granting involuntary bankruptcy.
From there, it’s up to the bankruptcy court to make the decision on approving or denying the request for involuntary bankruptcy against a creditor. Creditors mainly request such bankruptcies against businesses and not individuals. However, both possibilities remain open depending on the specific circumstances of each case.
What are the main requirements for involuntary bankruptcy?
The main requirement for requesting involuntary bankruptcy is that the creditor can only file it under Chapter 11 or Chapter 7 of the US Bankruptcy Code. It’s not possible to request such bankruptcy under Chapter 12 that deals with fishermen and farmers, or under Chapter 13 that is mostly available for individuals with steady income.
What’s more, creditors cannot request involuntary bankruptcy against a credit union, non-profit, insurance company, or bank. A creditor can qualify to file involuntary bankruptcy if they have a certain claim against one of their debtors. This claim cannot be contingent upon a liability or be subject to a dispute about the liability itself or the amount of the liability.
The amount of debt has to be no less than $16,750 and the creditor is required to demonstrate that their debtor is refusing to pay their debt. From there, the debtor has three weeks or 21 days to respond to the accusations before the process of involuntary bankruptcy begins.
Who is the most experienced bankruptcy lawyer in El Cajon, CA?
Involuntary bankruptcy is not something you should wait for and you should always react proactively and file for bankruptcy on your own and reap all the amazing benefits. Your life after bankruptcy will only get better as you free yourself from debt. Just make sure to closely investigate which debt bankruptcy discharges and what debt you cannot discharge through different types of bankruptcy.
Once you’ve gathered the necessary information it’s time to find the best lawyer to handle your bankruptcy and ensure swift process and successful results. That’s where Chang & Diamond come in. We’re the leading bankruptcy attorneys in El Cajon and all the surrounding areas. We offer a completely free initial consultation and professional bankruptcy representation. With our help, you’ll be able to enjoy the sights at Casa de Oro again. Call us today!