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Involuntary bankruptcy basics

The popular opinion that many in West Palm Beach may assign to bankruptcy is that it is simply a way for individuals or businesses to avoid having to their debts. While many of those who seek bankruptcy protection are legitimately in a position where they cannot afford to meet their liabilities, the concern of creditors that debtors might purposefully be avoiding paying them may be legitimate. Knowing this, the federal government has structured the bankruptcy code in such a way as to prevent the privileges of bankruptcy from being abused. This includes allowing creditors to force debtors into involuntary bankruptcy

By initiating an involuntary bankruptcy against an individual, creditors are essentially saying that they believe a debtor is capable of paying their bills, yet they are avoiding doing so. Indeed, as the Involuntary Petition Against an Individual form (as shared by the Federal Judiciary) shows, the allegations that a creditor must cite include a debtor generally not paying debts as they become due (the other is that a debtor has transferred property subject to a lien to a custodian to try and protect it from creditors' actions). 

Section 303 of the Federal Bankruptcy Code provides the requirements for initiating an involuntary bankruptcy. The basic qualifications for such an action include having at least three creditors holding claims against a debtor whose aggregate value is over $10,000. Cases where at debtor has less than 12 creditors need to only have one who has a claim amounting to over $10,000 to be subject to an involuntary bankruptcy. This right is only afforded to creditors in Chapter 7 and Chapter 11 bankruptcy cases. 

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