Can Creditors Force You to File For Bankruptcy?
Filing for bankruptcy is usually something we think of as a voluntary act in New York.
Go to a lawyer, provide documents and complete the process.
But in very rare cases, creditors may band together and force you to file for bankruptcy.
First, let me get one thing out of the way - the chances of this happening depend quite a bit on your situation.
Involuntary bankruptcy cases usually involve businesses and individuals with significant non-exempt assets, and are filed by creditors that are looking to a way to get their hands on those assets.
I have never seen a bunch of credit card companies get together and force a consumer in New York to file for Chapter 7 bankruptcy.
Ever.
I'm not saying it can't happen, just that I haven't seen it yet.
And remember, New York is a big place - if it's happens at all, chances are pretty good that it happens here.
Section 303 of the U.
S.
Bankruptcy Code governs involuntary bankruptcy cases, and provides that 3 or more creditors with claims totaling at least $13,475 may file a Chapter 7 or a Chapter 11 case against a person.
I'm not going to get into the business aspects of involuntary cases because I don't handle them as a general rule.
There are limitations on the type of claim that the creditors are allowed to have against you, but the most important one is that the claim cannot be the subject of a bona fide dispute as to liability or amount.
That means if you're being sued for a debt and are actively defending the claim in a New York court, the creditor can't find two more entities to gang up on you and file an involuntary bankruptcy case.
If your creditors file an involuntary bankruptcy case against you, the law allows you to continue using your property.
In fact, you can even sell it or give it away unless the creditors request that a trustee be appointed to seize your assets.
The court may require you to post a bond or other security to protect the value of the property.
If a bankruptcy case is filed against you by your creditors, you need to take immediate action by filing an answer to the petition.
If you don't then the court will simply move ahead with liquidating your property.
Before you panic, remember what I said - involuntary bankruptcy proceedings against consumers are extremely rare.
If a New York involuntary bankruptcy case is commenced it's usually against a big-money person or corporation.
But if it ever happens to you, don't sit around - do something.
Fast.
Go to a lawyer, provide documents and complete the process.
But in very rare cases, creditors may band together and force you to file for bankruptcy.
First, let me get one thing out of the way - the chances of this happening depend quite a bit on your situation.
Involuntary bankruptcy cases usually involve businesses and individuals with significant non-exempt assets, and are filed by creditors that are looking to a way to get their hands on those assets.
I have never seen a bunch of credit card companies get together and force a consumer in New York to file for Chapter 7 bankruptcy.
Ever.
I'm not saying it can't happen, just that I haven't seen it yet.
And remember, New York is a big place - if it's happens at all, chances are pretty good that it happens here.
Section 303 of the U.
S.
Bankruptcy Code governs involuntary bankruptcy cases, and provides that 3 or more creditors with claims totaling at least $13,475 may file a Chapter 7 or a Chapter 11 case against a person.
I'm not going to get into the business aspects of involuntary cases because I don't handle them as a general rule.
There are limitations on the type of claim that the creditors are allowed to have against you, but the most important one is that the claim cannot be the subject of a bona fide dispute as to liability or amount.
That means if you're being sued for a debt and are actively defending the claim in a New York court, the creditor can't find two more entities to gang up on you and file an involuntary bankruptcy case.
If your creditors file an involuntary bankruptcy case against you, the law allows you to continue using your property.
In fact, you can even sell it or give it away unless the creditors request that a trustee be appointed to seize your assets.
The court may require you to post a bond or other security to protect the value of the property.
If a bankruptcy case is filed against you by your creditors, you need to take immediate action by filing an answer to the petition.
If you don't then the court will simply move ahead with liquidating your property.
Before you panic, remember what I said - involuntary bankruptcy proceedings against consumers are extremely rare.
If a New York involuntary bankruptcy case is commenced it's usually against a big-money person or corporation.
But if it ever happens to you, don't sit around - do something.
Fast.
Source...