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Most people who file for bankruptcy do so of their own volition. That said, sometimes a creditor may be able to make a debtor file for bankruptcy against their will. This is what you need to know about involuntary bankruptcy and how to protect yourself from creditors who may be willing to pursue bankruptcy against you by force.

Involuntary Bankruptcy 101 

Although uncommon, involuntary bankruptcy provides a remedy for certain kinds of creditors to collect certain types of debt under Chapter 11 or Chapter 7 of the U.S. bankruptcy code. Typically, this occurs only in extreme scenarios where a debtor owes a very large sum of money or several different creditors.

Are There Any Limits to What Creditors Can Do?

There are multiple restrictions on creditors who wish to file involuntary bankruptcy against a debtor to prevent its abuse. A creditor cannot:

  • Petition for an involuntary bankruptcy under Chapter 13 provisions
  • Neglect to do their due diligence when investigating the operations of the organization they want to file an involuntary bankruptcy against; they should go further than simply their own transactions with the business
  • File for an involuntary bankruptcy against a corporation that isn’t moneyed, a farmer or family farmer, or another qualifying company

If a debtor has more than 12 creditors in total, a creditor must file a petition with at least two others. The debt owed by the defendant must amount to a minimum of $16,750 in non-contingent, unsecured, undisputed debt. 

How to Defend Against Involuntary Bankruptcy

If you are the subject of an involuntary bankruptcy action, it may be possible to fight the petition by illustrating how the creditors’ claims against you are unjustified or false. Typically, this occurs during a hearing where both you and the creditor will be given the opportunity to present your case and its supporting evidence in front of a judge. Then, the judge will decide if the involuntary bankruptcy should be allowed to proceed or be dismissed.

How to Get Immediate Relief From Creditors 

You can get immediate relief from creditors who are harassing you, threatening you, or filing an action against you with the help of an experienced lawyer. Contact us today for a consultation 469-751-7467 (DFW) or 254-304-7161 (Central Texas). At Sims Bankruptcy Law, PLLC, we understand the pressure you’re under and will work to act quickly to provide you with the advocacy and support you need.

By : First Page Attorney | April 5, 2021 | Bankruptcy