Question

In: Accounting

if you were a creditor and a significant debt were owed to you, at what point...

if you were a creditor and a significant debt were owed to you, at what point would you consider filing a Petition in Involuntary Bankruptcy against your debtor? What exactly is a Petition in Involuntary Bankruptcy? Describe and properly cite your options and discuss.

Solutions

Expert Solution

Answer :-

1) Involuntary bankruptcy is a legal proceeding through which creditors request that a person or business go into bankruptcy, rather than doing so on the person’s or business' own accord.

2) Creditors may request involuntary bankruptcy if they feel that they will not be paid if bankruptcy proceedings are not entered into, and so they must seek a legal requirement to force the debtor to pay.

3) Involuntary bankruptcy differs significantly from a voluntary bankruptcy that a debtor initiates by filing a petition with the courts. Bankruptcy offers an individual or business a chance to start fresh by forgiving debts that simply cannot be paid while offering creditors a chance to obtain some measure of repayment based on the individual's or business's assets available for liquidation.

4) Involuntary bankruptcies are primarily filed against businesses, where creditors believe the business can pay its outstanding debts but refuses to do so for some reason.

5) A petitioning creditor is qualified to file an involuntary petition if they hold a claim against the debtor that is not contingent as to liability or the subject of a bona fide dispute as to liability or amount, according to the Bankruptcy Code, equals at least $16,750 and demonstrates that the debtor is generally not paying debts as they become due.

Thank you.


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