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Do I Need to Worry About Involuntary Bankruptcy?


When you are struggling to pay your debts in Orlando and you are wondering whether consumer bankruptcy is the right path forward for you, you may have begun running some internet searches for personal bankruptcy or consumer bankruptcy. You have most likely learned that, as an individual consumer, you could be eligible to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, which are the two most common types of bankruptcy for individuals. At the same time, you might have come across information about involuntary bankruptcy cases, and situations in which creditors file bankruptcy petitions against debtors. As a result, you may be wondering whether you need to worry about an involuntary bankruptcy proceeding if you have not yet made a decision about whether consumer bankruptcy is right for you.

In short, consumer involuntary bankruptcy cases are pretty rare, but they can occasionally happen. We will tell you more about involuntary cases and what you should know.

Involuntary Bankruptcy Cases Typically Involve Businesses 

Under the U.S. Bankruptcy Code, most involuntary bankruptcy cases involve businesses. What this means is that a creditor, or a small group or creditors, will together file an involuntary bankruptcy petition against a debtor when they believe the debtor should be working toward repaying what is owed. In most cases, an involuntary bankruptcy case will be a Chapter 7 or Chapter 11 case against a business entity.

If you run a small business that is a sole proprietorship, you should know that an involuntary bankruptcy case against your business is, for all intents and purposes, also an involuntary bankruptcy case against you as an individual since individuals and business owners are, in effect, one and the same in a sole proprietorship. Otherwise, an involuntary bankruptcy against an LLC or a corporation, for example, will not be an involuntary bankruptcy case against an individual consumer even if you are an owner or member in one of these types of businesses. 

Only Chapter 7 and Chapter 11 Bankruptcies Can Be Filed Involuntarily 

The U.S. Bankruptcy Code only allows involuntary bankruptcy cases to be filed under Chapter 7 or Chapter 11. What does this mean for individuals? Chapter 11 cases are extremely rare for consumers. As such, even when consumers are faced with involuntary bankruptcy cases, those are usually Chapter 7 cases. 

Married Couples Cannot Face Involuntary Bankruptcy 

Although married couples can jointly file for consumer bankruptcy, they cannot jointly face an involuntary bankruptcy petition under U.S. bankruptcy law. 

Creditors Must Be Owed a Certain Amount of Money to Be Able to File an Involuntary Petition 

To file an involuntary bankruptcy petition, a single creditor or a group of three or more creditors must be owed $16,750 or more. 

Contact an Orlando Consumer Bankruptcy Lawyer 

Although it is important to remember that involuntary bankruptcies are quite rare among individual consumers, it is important to understand how the consumer bankruptcy process works and what you should expect. If you have questions about filing for personal bankruptcy, or if you are facing an involuntary bankruptcy petition, you should get in touch with an Orlando bankruptcy attorney as soon as possible. Contact Anderson & Ferrin to discuss your case with an advocate at our firm.


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