Q: My businesses creditors threatened to file for an involuntary bankruptcy. What on earth is that, or was it just a
baseless threat?
A:
Your creditors can file an involuntary petition forcing you into bankruptcy. You can either fight it or proceed with the bankruptcy. Most likely, it will be filed as a chapter 7 involuntary, which means a trustee will be assigned by the court. The trustee would be tasked with administering the bankruptcy estate, meaning liquidating & selling assets to pay your creditors.
Information provided for informational purposes only and should not be taken as legal advice.
A: Involuntary bankruptcy is a legal filing by creditors, petitioning that the debtor is thrown into bankruptcy against his or her will. There are three basic requirements for involuntary bankruptcy. If the debtor has more than 12 creditors, it takes three creditors to file. First, the debtor must be either a commercial entity or an individual (who is not a farmer). Generally, involuntary bankruptcy may not be filed against not for profit organizations. Second, the debt of the petitioning creditor must not be contingent or disputed. The third requirement of an involuntary filing is that the debtor must not be paying the debts as they come due.
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