Involuntary Bankruptcy Overview
Involuntary bankruptcy can be defined as a situation in which a creditor may force a debtor into bankruptcy. In this creditors, rather than debtors file the petition in bankruptcy. Involuntary petitions are rare, however, occasionally used in business settings to force a company into bankruptcy so that creditors can enforce their rights. After the petition is filed, the debtor usually has 20 days in which to contest it. If the debtor objects to involuntary bankruptcy, it must be showed by the debtor, that payments are either not as overdue as claimed or that steps are being taken to restore solvency. The bankruptcy court can force settlement to repay the creditor, if the debtor does not show this. Involuntary bankruptcy can be initiated only under chapter 7 and chapter 11 of the Bankruptcy Code. If a petition for involuntary bankruptcy is denied, a debtor may be awarded attorney fees and costs, and may even receive punitive damages, depending upon the facts of the case.