Most cases of bankruptcy are initiated by the debtor, but did you know that creditors could also file a bankruptcy case against a consumer? This is known as an involuntary bankruptcy case, and these are extremely rare, though this doesn’t mean it won’t happen to you.
If you’re facing an involuntary bankruptcy case, seek immediate legal counsel from bankruptcy lawyers who can give you a closer look at the nature of such cases.
What Happens in an Involuntary Bankruptcy Case?
In an involuntary bankruptcy, a creditor or group of creditors files a petition for bankruptcy against a consumer or a corporation which owes them a substantial amount of money. There are, however, several restrictions as to the creditors’ ability to file a bankruptcy case. For instance, they are not allowed to file against family farmers or fishermen, or even file a joint bankruptcy against a married couple. Furthermore, creditors are only allowed to file a Chapter 7 bankruptcy against their debtors.
There are also particular conditions that creditors must meet to file an involuntary bankruptcy. A debtor must have fewer than 12 unsecured creditors, and the creditor must have an unsecured claim of $15,325 or more. Should three or more creditors plan on filing an involuntary case against a single consumer, their claims must be at least $15,325 in total.
Why Are These Cases Rare?
Creditors often find it difficult to meet the aforementioned criteria. Even if they do find a debtor with these qualifications, creditors are reluctant to push through with an involuntary bankruptcy case for two reasons. First, bankruptcy offers protection, and even a couple of advantages, to debtors. Second, should a court dismiss the case, the petitioning creditor faces numerous costs, not to mention paying for compensatory and punitive damages.
Your Options Against an Involuntary Bankruptcy
Fortunately, you have numerous options should a creditor file an involuntary bankruptcy case against you. You can opt to go through bankruptcy, since it offers you many protections that you can’t get from other options. If you feel that a Chapter 7 bankruptcy isn’t the best option for you, you can even convert your case into a Chapter 13 bankruptcy.
The last option is to contest the involuntary bankruptcy case. In this option, you’ll need help from a bankruptcy lawyer in Raleigh, NC, like those from the Weik Law Office. With their help, you can be assured that you can have a fighting chance in court.
Bankruptcy: Voluntary vs. Involuntary, TheBankruptcySite
Involuntary vs. Voluntary Bankruptcy: Can You Be Forced to File Bankruptcy?, AllLaw