These Is What Involuntary Bankruptcy Entails

Involuntary bankruptcy refers to a scenario where a person or a business is sued by their creditors for not paying up their debts in good time

. When this happens, one is left with no choice but to make a legal commitment to clear all those debts within a given period of time, which is normally stipulated by a court of law. If you have more than 12 creditors, normally any three of them will be required to file a petition in unison. If they are less than 12, then any one of them can go ahead and file the suit against you.

To some extent, being sued for bankruptcy is a form of relief. This is because it gives you some breathing space as you try to work things out. During this period, your creditors are barred from following you up for payment, and any correspondence between you and them is handled by your attorney on your behalf. As such, numerous phone calls asking you to pay up and unnecessary threats are minimized. However, bankruptcy, voluntary or otherwise greatly taints your image. People may avoid working with you for fear that you may not pay them up.

However, this should not worry you because you can still rebuild your credit worth. Once you have been summoned for involuntary bankruptcy, you may choose to contest against it. For this process to be successful, you will need to hire a bankruptcy attorney to represent you in court. However, you will need to do so within 20 days after the petition has been filed. The court will then have a look at your payment history and determine whether the petition was rightfully filed. A court may not grant a creditor his petition if;

1. Your records show that you have constantly paid on time in the past.

2. Out of your many creditors, only two or three are complaining of not being paid in time. Instead of declaring you bankrupt, a court may want to first understand why you pay up all other creditors on time and not these two. You will then be required to make a commitment to pay them up as soon as possible.

3. The petition is filed out of malicious motives. This may be the case when there is bad blood between a creditor and his debtor and the creditor takes advantage of the situation to file a lawsuit against the debtor.

The bankruptcy law requires that an involuntary bankruptcy petition be filed under chapter 7 or 11 of the bankruptcy laws. Chapter 7 law is also known as liquidation law and requires that a trustee be appointed to take over the assets of the debtor. When the court gives a ruling for the assets to be liquidated, the trustee will be responsible for distributing the proceeds to the creditors. The debtor is not supposed to tamper with the process. Contrary to chapter 7, chapter 11 allows the debtor to remain in possession of his assets, but a plan be formulated on how he is going to repay and clear with all his creditors within a stipulated amount of time.

These Is What Involuntary Bankruptcy Entails

By: Peter Gitundu

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