Involuntary Bankruptcy
Starting your own business can be a scary thing. Most entrepreneurs know that beginning a business means facing possible bankruptcy. What they don’t know is that involuntary bankruptcy can also occur.
Involuntary bankruptcy happens when creditors start to file petitions in order to force a debtor to pay up. Once these petitions have been filed, the debtor then has twenty days to file any objection to the petition. If the debtor does file an objection, the case will then go to trial. If there is no objection filed, the bankruptcy is then put into place. There are a few things to consider when it comes to this kind of bankruptcy. The good news is that you might not have to close up shop right away.
This kind of bankruptcy can only be filed under Chapter 11 or chapter 7. While this article will briefly cover the various details involved in both types of filing, it is crucial that you speak with a qualified bankruptcy lawyer. This article is only meant to provide you with a bit of information, and it is not meant to be taken as legal advice. That said, let’s talk about the difference between Chapter 11 and Chapter 7. To begin, let’s start with Chapter 11.
Chapter 11 is common amongst businesses filing for bankruptcy (even those filing for involuntary bankruptcy). Chapter 11 allows the debtor to stay in business while constructing a reorganization plan. Those creditors looking to be paid the money that they are owed will collect their money from the business revenues. Contrastingly, Chapter 7 involves closing up shop for good, selling off all assets, and paying lenders with the money that is generated through the sale of the assets. Those people immune from both Chapter 11 and Chapter 7 include farmers, nonprofit groups, banks, insurance companies, credit unions, and savings and loan companies.
If you are a small business owner about to go into panic mode regarding the aforementioned information, consider this: there must be at least three lenders that file a bankruptcy petition. Additionally, at least one of these lenders must be owed more than $10,775.
If you are facing involuntary bankruptcy, make sure to speak with a bankruptcy lawyer. A qualified lawyer will go over all of your options with you – this kind of situation may seem bleak, but there are ways to tackle this financial monster.