Bankruptcy is often advertised as an option you can turn to in a tough financial situation. It provides you with a way to discharge some, if not all, of your debt and get you back on track to a sound financial future.
In rare situations, an unwilling debtor might get forced into involuntary bankruptcy by a creditor or group of creditors. Typically, this type of bankruptcy is brought against a business with assets, or even against a wealthy individual.
This is because forcing the bankruptcy of an individual or business without assets could be a bad move. Creditors would not receive much in that situation.
How Does Involuntary Bankruptcy Work?
Involuntary bankruptcy begins when one or more creditors choose to file a petition with the bankruptcy court. It is important to note that involuntary bankruptcy can only be filed under Chapter 7 or Chapter 11 bankruptcy. Chapter 12 and Chapter 13 bankruptcy are not permitted.
In order to justify an individual’s or business’s involuntary bankruptcy, two circumstances must be met:
- The debtor is not paying debts as they are due.
- A custodian, receiver, or agent took control of the debtor’s property with a lien within the last 120 days.
Once the petition is filed, the debtor has the ability to respond to the petition. If they respond, the bankruptcy court will schedule a hearing to determine if the case should move forward.
If the judge rules in favor of the debtor, the case will be dismissed and the creditor might even have to cover the debtor’s costs and fees. In the event that the debtor does not respond to the petition, the bankruptcy court will move forward with the case. The debtor will have to participate in the bankruptcy.
Now, there are some limitations and stipulations that surround creditors’ ability to file for involuntary bankruptcy. For starters, if the debtor has more than 12 unsecured creditors, a minimum of three must join the petition. On top of that, the three creditors must have at least $15,775 combined in unsecured outstanding debt.
An individual creditor has the power to file for involuntary bankruptcy against a debtor if the creditor is owed at least $15,775. In addition, the debtor must have less than 12 unsecured creditors in this scenario. Also, the amount of debt must be known and cannot be conditioned on a future event like a lawsuit judgment.
One last note about involuntary bankruptcy is that it cannot be brought against banks, insurance companies, not-for-profit organizations, farmers, family farmers, or credit unions.
If you are facing involuntary bankruptcy, you will need the help of an experienced New Jersey bankruptcy lawyer.
Contact an Experienced Camden County Bankruptcy Lawyer Today
The bankruptcy process itself is detailed and deadline-oriented. Even a simple mistake could lead to your petition being dismissed altogether. The process is even more complex and scary when it is thrust upon you by creditors.
The good news is that there are lawyers who are ready and willing to help you in this time of need. For those in New Jersey, Joel R. Spivack, Esq. is the man to get the job done.
Mr. Spivack is well-versed in bankruptcy law and can make sure that your debtor’s rights are protected throughout the process. He will also dispel any myths about bankruptcy. He represents clients across New Jersey, including Camden, Cherry Hill, Voorhees, and Pennsauken, NJ.
To find out more about how Joel Spivack can help guide you through the bankruptcy process, call (856) 488-1200 or fill out the online contact form at your earliest convenience. The Law Office of Joel R. Spivack is located at 1415 Marlton Pike East, Suite 302, Cherry Hill, NJ 08034.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.