- When a debtor has fewer than 12 unsecured creditors and the debt from at least one of these comes to $10,000, then that creditor can initiate an involuntary petition even without the consent of the other creditors. But a petition may also be filed jointly by at least three creditors that have a total summed debt of $10,000.
- There are two reasons for filing an involuntary bankruptcy: when the debtor is not paying his debts when they are due, or when a creditor 120 days prior to the filing has placed a lien against the debtor's property. There are, however, exceptions to this, and if there is a legal dispute regarding the liability amount, then a creditor can't file an involuntary bankruptcy petition.
- The procedure begins when the petition made by the creditors is filed with the bankruptcy court. The petition is also served on the debtor with a summons. The debtor must answer the petition within 20 days of being served. If the debtor fails to respond within the allotted 20 days, the bankruptcy court will by default offer relief to the creditors. If, however, the debtor responds to the petition, the court will consider evidence and rule in favor of either the debtor or the creditor.
- Creditors may decide to force a debtor into involuntary bankruptcy when the debt is unsecured or under-secured with debtor's property. When a debt is unsecured, a creditor cannot gain access to the debtor's property without a judgment, a process that can take longer and cost more than an involuntary bankruptcy proceeding. In some cases this type of bankruptcy is advantageous to creditors because it forces a debtor to distribute his assets and pay off some or all of the debt.
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