Involuntary Bankruptcy- Determine Whether Its Done In Good Faith
Bankruptcy is a common phenomenon in most countries today. Thousands of individuals and businesses are going to court to seek protection against creditors harassment. This is done voluntarily by the debtor going to court to file a petition. However what many people do not know is that the creditors can force one into involuntary insolvency. This way, the debtor will face a bigger number of creditors at once other than paying a part of these at the expense of others.
The debtor in involuntary bankruptcy is given a chance to either liquidate or reorganize. Petitions under these chapters can be opened against anyone, apart from farmers, banks, non-profit organizations, insurance companies, savings unions and credit institutions. Though involuntary bankruptcy may not be common, it only happens when the debtor has spent a long period of time without meeting their monthly obligation towards creditors.
This could also be the case if a custodian was appointed by the court to take over the debtors assets three months before the petition was filed. In this case, the court will only require a minimum of three creditors who will file a petition against the debtor. This is in case the debtor has 12 or more creditors.
The court will look into the petition filed and determine whether it is done in good faith or not. In case the creditors are playing fair against the debtor, the court will enter an order for relief. In case this is not being done in good faith, the court will award monetary damages to the debtor.
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Article Source:http://www.articlesbase.com/personal-finance-articles/involuntary-bankruptcy-determine-whether-its-done-in-good-faith-920628.html
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