What is Forced Bankruptcy

The majority of entrepreneurs are extremely aware of the shadow of bankruptcy. What many people never realize until it happens to them is that the creditors that were so helpful in starting a business venture can force that business into involuntary bankruptcy.

Creditors are able to initiate involuntary bankruptcy proceedings against a company. They do this for several reasons like wanting to force a debtor to confront all of his or her creditors at the same time as opposed to only giving attention to those creditors that press the hardest. Involuntary bankruptcy is beneficial to creditors in that it prevents a debtor from draining all of the available assets before finally giving up on the venture and filing for bankruptcy.

Just like when the debtor begins bankruptcy proceedings, involuntary or forced bankruptcy starts with a creditor filing a petition and summons with a clerk in the U.S. Bankruptcy Court. After this is filed, the debtor has 20 days to file objections to the bankruptcy. If the debtor files objections, the case can go to trial. If the debtor does not, the bankruptcy will proceed.

Involuntary bankruptcy can be covered under Chapter 7 or Chapter 11 bankruptcy only. There are no other options for a creditor to force a debtor into bankruptcy.

A debtor can become a target of involuntary bankruptcy in two ways. The first develops when the debtor isn’t paying up, aside from any disputed arrears. The other way to become the target of forced bankruptcy is if a custodian was appointed or took possession of the debtor’s property within 120 of filing the petition.

Contact a Boston Bankruptcy Lawyer

For more information on bankruptcy in all forms, contact the Boston bankruptcy lawyer of Joshua Spirn & Associates at 1-800-975-5346.