You might think that all bankruptcy should be considered involuntary, but in fact true involuntary bankruptcy occurs when an individual or organization is made bankrupt at the request of their creditors. As a threshold matter, bankruptcy cases are either voluntary or involuntary. In voluntary bankruptcy cases, which account for the overwhelming majority of cases, debtors petition the bankruptcy court.
Usually a creditor will try to force their debtor into involuntary bankruptcy if the debtor owes them a sizeable amount of money or if the debtor has missed a great number of the regular payments. If they can force the bankruptcy, there might be some money left in the estate to recoup.
Forcing a debtor into involuntary bankruptcy allows a creditor to collect debt before the debtor liquidates / moves all of their assets. Often before an individual or organization files for bankruptcy they will remove as much money from the estate as possible.
With involuntary bankruptcy, creditors, rather than the debtor, 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.
If a bankruptcy goes to court because the debtor has filed objections there is the possibility that the court will deny the creditors petition. However, if the court does find that a debtor should be declared bankrupt the debtor will have to confront all of the creditors to which he owes money.
© 2010 escapefrombankruptcy.com Website Created by Indemand Sales and Solutions http://www.indemand.net/