DEFINITION of 'Involuntary Bankruptcy'

A legal proceeding in which a person or business is requested to go into bankruptcy by creditors, rather than on the person or business' own accord. Creditors seeking involuntary bankruptcy must petition the court to initiate the proceedings, and the indebted party can file an objection to force a case.

BREAKING DOWN 'Involuntary Bankruptcy'

Involuntary bankruptcy is requested by creditors who feel that they will not be paid if bankruptcy proceedings are not entered into, and seek a legal requirement to force the debtor to pay. In order for involuntary bankruptcy to be brought forward, the debtor must have a certain amount of debt that must be met. This amount depends on whether the debtor is an individual or a business.

RELATED TERMS
  1. Voluntary Bankruptcy

    A type of bankruptcy where an insolvent debtor brings the petition ...
  2. Creditor

    A creditor is an entity that extends credit by giving another ...
  3. 341 Meeting

    The meeting of creditors that occurs when an individual files ...
  4. Prepackaged Bankruptcy

    A plan for financial reorganization that a company prepares in ...
  5. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
  6. Chapter 7

    A bankruptcy proceeding in which a company stops all operations ...
Related Articles
  1. Financial Advisor

    Should You File For Bankruptcy?

    Find out how to determine whether this option will help or hurt your financial situation.
  2. Taxes

    Bankruptcy

    Learn what happens when an individual or an organization files for bankruptcy.
  3. Financial Advisor

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  4. Taxes

    How to Hire a Bankruptcy Lawyer

    How do you find the right bankruptcy lawyer? What you should look for to determine the right attorney for you.
  5. Personal Finance

    Life After Bankruptcy

    Find out what you have to look forward to after filing for Chapter 7 or 13.
  6. Insurance

    Top 5 Reasons Why People Go Bankrupt

    The biggest cause of bankruptcy in the United States is medical expenses.
  7. Taxes

    Bankruptcy Consequences

    You've done the deed and are out from under your debts – or embarked on a repayment plan. What consequences can you expect and how long will recovery take?
  8. Personal Finance

    Millionaires With The Most Bankruptcies

    These celebrities made a lot and lost a lot - sometimes several times over. Find out who they are.
  9. Financial Advisor

    Bankruptcy Protection For Your Accounts

    Will the plan assets you've worked hard for be safe if you experience a personal financial crisis?
  10. Taxes

    Your Guide To Chapter 7 Bankruptcy

    Filing for Chapter 7 bankruptcy triggers an automatic stay that forbids businesses from collecting on your debt, or suing you.
RELATED FAQS
  1. What happens when a corporation declares bankruptcy?

    Understand what options are available to corporations under bankruptcy protection, and learn what takes place after bankruptcy ... Read Answer >>
  2. Can personal loans be included in bankruptcy?

    Read about debts that are dischargeable when filing for bankruptcy. Learn about how personal loans are treated when filing ... Read Answer >>
  3. Will filing bankruptcy stop an eviction?

    Learn about how filing bankruptcy can affect an eviction process, and find out what recourse your landlord has if you file ... Read Answer >>
  4. What debts can I discharge when filing for bankruptcy?

    Discover which types of debt can be discharged through a Chapter 7 or a Chapter 13 bankruptcy and which debts require an ... Read Answer >>
Hot Definitions
  1. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
  2. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  3. Aggregate Demand

    The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  6. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
Trading Center