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.

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