Creditors expect to be paid back when making loans, and bankruptcy laws in America act in the interest of, not just debtors, but also creditors, through the involuntary bankruptcy process. Involuntary bankruptcy serves as a way to force unwilling debtors to reorganize their debts or liquidate their assets in an effort to satisfy a loan.
Powerful Tool for Creditors
If a business owes you money you may be compelled to sue them in an effort to seize assets of the debtor in order to get paid back a portion of the money that you are owed. If a judgment has already been entered in your favor, the company is legally obligate to pay you the money. But what if the company doesn’t pay up? In business, Chapter 11 bankruptcy is normally reserved for companies who are in debt and need extra time or different terms in order to satisfy business debts. However, sometimes creditors who are tired of waiting to be paid can file an involuntary Chapter 7 bankruptcy against a company that owes it money.
Defense for Involuntary Bankruptcy
In order for a creditor to successfully file an involuntary bankruptcy petition, they must prove that the debtor isn’t paying or has lost control of their property to enforce a lien. When a debtor has more than 12 unsecured creditors, three or more of the creditors must band together to institute an involuntary bankruptcy. The total amount of debt must also be at least $15,325.
A debtor who has been notified of an involuntary petition has 21 days from service of the notice to respond. Failure to do so and a debtor will be adjudicated and subject to the bankruptcy case. Alternatively, a debtor can challenge or dispute the legality or factual details of the bankruptcy filing in an effort to have the bankruptcy case dismissed.
How to File an Involuntary Petition
An involuntary petition for bankruptcy is filed in a similar manner as voluntary petitions for bankruptcy are. You must file or petition the local bankruptcy courts stating your claim and amount. Involuntary petitions can be filed as a single qualifying creditor or several. While Ohio bankruptcy attorneys typically represent debtors, they can be a valuable resource for creditors seeking protection of their rights as well, and thus it’s recommended to consult a bankruptcy lawyer to ensure you increase your chances of becoming a qualified debtor in an involuntary bankruptcy case.