Understanding Involuntary Bankruptcy

Most people file for bankruptcy of their own volition. They realize that their income and necessary expenses leave them with little leftover to tackle huge credit card or medical bills and want to start over. In a minority of cases, however, debtors visit a bankruptcy attorney because the decision was made for them: a creditor filed an involuntary bankruptcy petition against them.

Involuntary Bankruptcy Explained

With an involuntary bankruptcy, one or more creditors files a petition against you. A single creditor can take this step if you owe them at least $15,775 in unsecured debt and you have no more than 12 unsecured creditors in total. If there are more, at least three of them must participate in the bankruptcy petition and their unsecured claims must total at least $15,775.

person looking into an empty wallet

A creditor can file a bankruptcy petition only under Chapter 7 or Chapter 11. In their petition, they must state that they are pursuing an involuntary bankruptcy against you because you are not paying debts or because an agent, receiver, or custodian seized your property within the last 120 days to enforce a lien.

There are some limits on a creditor’s ability to force you into bankruptcy. For example:

  • Employers, insiders, or the recipient of an undone property or money transfer cannot file an involuntary petition against you.
  • Creditors cannot pursue an involuntary bankruptcy petition if you dispute the debt or it is contingent, meaning that it revolves around an event that has yet to happen. 
  • Involuntary bankruptcy cannot be filed against farmers, fishermen, or non-profits.

What Can You Do?

If one or more of your creditors tries to force you into bankruptcy, you have a couple of options.

One is to engage an attorney to help you oppose the petition and convince a judge that it is unjustified. The other is to continue with the bankruptcy, which may be preferable if you have no nonexempt assets and a lot of debt.

If you do have assets that you want to protect, a bankruptcy attorney can help you convert your case to a Chapter 13, which allows you to keep nonexempt property by repaying your debts over three to five years.

Contact an Oklahoma Bankruptcy Attorney

If you are facing an involuntary action, contact an Oklahoma bankruptcy attorney who can advise you on whether you should contest the petition or allow it to proceed. At the Law Offices of B. David Sisson, we will explain your options and help you protect your rights if your creditors acted in bad faith. Attorney Sisson is certified as a specialist in consumer bankruptcy law by the American Board of Certification, and will provide you with the advice you need to respond appropriately to an involuntary petition. To schedule a consultation today, please contact us.

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