In this video, our Polk County chapter 7 bankruptcy attorneys explain how involuntary bankruptcy is a legal process by which creditors can “force” an individual or business to enter into bankruptcy. The creditor must petition the courts to initiate the bankruptcy proceedings and the indebted party can file an objection to force a case. Having this option gives creditors some degree of protection against individuals or businesses who may otherwise take advantage of the business.
It’s rare that a business will petition for involuntary bankruptcy against an individual because the effort of getting enough money from one person versus the assets of a business is low, but it does still happen. The creditor may feel they won’t get any money out of the indebted party unless forcing them to enter into bankruptcy proceedings, and so the creditor must seek legal grounds in order to collect on the debt. Involuntary bankruptcy can’t be brought forward against an individual or business for any amount of money, the indebted party must have a significant amount of unmet debt. The amount of debt warranting a petition of involuntary bankruptcy is dependent on whether the debtor is an individual or business.