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What is involuntary bankruptcy?

| Aug 7, 2019 | Chapter 7 Bankruptcy

Many Florida residents, including yourself, may assume that filing for bankruptcy is a choice. In most cases, you would be right. However, what if you are informed that your creditors are petitioning for your bankruptcy? Can they do this?

As FindLaw explains, in rare cases creditors can request that those who owe them debts go through bankruptcy proceedings. You may wonder why this is permitted. In a Chapter 7 bankruptcy, eligible assets are liquidated to repay creditors. This allows them to regain a portion, if not all, of the debt that is owed to them. If a creditor takes no legal action and relies instead on sending bills and collection notices, the chances are higher that the debt will not be paid.

Creditors file involuntary bankruptcy petitions against businesses far more often than they do against individuals, because people typically have less recoverable assets to liquidate. Chapter 7 and Chapter 11 are the only types of bankruptcies permitted in an involuntary bankruptcy petition. If this happens to you, you may object to the action taken against you if you do not want to be forced into bankruptcy.

It is not unwise to consider filing for Chapter 7 or Chapter 13 bankruptcy if you are being pursued by creditors. These options may help you wipe your debt clean or restructure your payments so they are more manageable. Like others, however, you may wish to choose your options on your own terms. Since this topic can be complex, the information here should not replace the advice of a lawyer.

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