Filing for chapter 7 bankruptcy can be a difficult process, but sometimes, those doing so have come to the conclusion that it is the only solution to a very complex situation. Other times, those with debt try as hard as they can to repay the loans and credit lines they've utilized. However, in certain instances, you could potentially be forced into a chapter 7 bankruptcy.
Although there are certain rules that apply to this type of 'creditor-initiated' bankruptcy, it is a legally valid tool that creditors can leverage in an attempt to collect on past debts. This article outlines some of the intricacies of chapter 7 involuntary bankruptcy proceedings.
Not all debtors are subject to an involuntary bankruptcy. Banks, credit unions, savings and loans institutions, non-profit organizations, insurance companies, and farmers are all exempt from the threat of involuntary bankruptcy.
If you have more than eleven total creditors, then it will be necessary for at least three to collaborate in filing a petition for involuntary bankruptcy. Eleven creditors might seem like a large number, but when you take into consideration simple things like electric and gas utilities, cell phone bills, and credit cards, it is easy to see how one can accumulate multiple creditors.
If you do have less than eleven total creditors, than it is possible for one creditor to initiate the chapter 7 bankruptcy process against you. However, in many instances, the courts will regard this kind of two-party dispute as inappropriate for bankruptcy court, and insist the resolution be taken elsewhere.
Regardless of the amount of debt you carry, it is unlikely that a single creditor will initiate an involuntary bankruptcy claim against you. More importantly, there are minimum debt requirements pertaining to the amount of money each creditor is due before an involuntary bankruptcy proceeding can commence.
You are at risk of having your creditors initiate an involuntary chapter 7 bankruptcy against you if you owe more than the sum total of $15,325. However, so long as you do not owe an amount in excess of this figure to any one creditor, than the only possibility of an involuntary bankruptcy is when three or more creditors jointly file a petition against you.
If you have fewer than eleven total creditors and your cumulative debt is less than $15,325, creditors have no legal basis via which to pursue an involuntary bankruptcy.
Overall, a creditor-initiated bankruptcy can bring about much turmoil in one's personal and financial life, and enlisting a qualified bankruptcy attorney such as Morrison & Murff can ensure that creditors are operating within their legal boundaries.