Bankruptcy is a process available to individuals and businesses alike. If you’re struggling to meet monthly payments on time and debts are piling up, you can choose to use bankruptcy for long-term debt relief. The majority of individual consumer and business bankruptcies are filed voluntarily. If the filer is ready to pay the required bankruptcy fees and ideally is also able to pay for legal representation, they will file a voluntary case that is appropriate for their debts and incomes. However, there are instances when bankruptcy cases are involuntary. If you’re considering filing for voluntary bankruptcy to help with long-term debt management in Fairmont, MN, Behm Law Group, Ltd. can help.
Involuntary bankruptcy for individuals or businesses work similarly. If creditors bring involuntary bankruptcy legal proceedings to the court, you can be forced into a case that will work its way through the resolution of debts, for better or worse for any party involved.
An involuntary bankruptcy case occurs when creditors can prove that a debtor is able to repay their debts and is choosing not to do so for some reason. Creditors may believe they will not get repaid if an involuntary bankruptcy is not initiated.
Because debtors who can repay debts but choose not to often have value in nonessential assets that could be sold, involuntary bankruptcy cases are typically filed against businesses due to their more complex financial circumstances. There are several requirements that must be met before an involuntary bankruptcy can be filed.
Some of the main requirements for involuntary bankruptcy include:
- The case to be filed must be a Chapter 7 liquidation (individual or business) or a Chapter 11 reorganization (business)
- Involuntary bankruptcy debtors cannot be nonprofit organizations, family farmers or fishers, banks, credit unions, or insurance agencies
- Creditors filing must have a claim against the debtor that isn’t “contingent as to liability or the subject of a bona fide dispute as to liability or amount.” Whether a claim is part of a bona fide dispute varies greatly from case to case
- The debt load owed must be at least $16,750
- Creditors must be able to prove that the debtor is able to repay their debts
- If a debtor has fewer than twelve creditors for debts that will be handled in the bankruptcy, just one creditor needs to file for an involuntary bankruptcy proceeding
- If a debtor has twelve or more creditors, at least three creditors must each participate in the filing of the involuntary bankruptcy proceeding
- Debtors must respond to an involuntary bankruptcy filing within 21 days before the proceedings start.
Debtors that have an involuntary case filed against them do have the option to convert it into a voluntary case.
To learn more about involuntary bankruptcy proceedings and debt management in Fairmont, MN and the surrounding area, contact Behm Law Group, Ltd. today at (507) 387-7200 or email@example.com.