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. Technical Bankruptcy

    The state of a company or person who has defaulted on a financial ...
Related Articles
  1. Taxes

    When To Declare Bankruptcy

    When is bankruptcy the best or only route– and when is it better to look at alternative solutions? And should you always hire a lawyer?
  2. Taxes

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  3. Taxes

    5 Myths About Personal Bankruptcy

    There are some persistent myths that hover over the process of bankruptcy that are either half-truths or completely false.
  4. Financial Advisor

    Should You File For Bankruptcy?

    Find out how to determine whether this option will help or hurt your financial situation.
  5. Small Business

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  6. Small Business

    Alternatives To Business Bankruptcy

    Bankruptcy isn't the only alternative for a struggling business. It can try negotiating with creditors or liquidating assets outside the U.S courts.
  7. Taxes

    How To Survive A Bankruptcy Filing

    Learn how to make filing for bankruptcy less painful so you can successfully rebuild your financial life.
  8. Taxes

    Bankruptcy

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

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
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. How do I get information about my bankruptcy case?

    Learn about different places to search when seeking information about an individual's bankruptcy. Learn about Public Access ... Read Answer >>
  3. 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 >>
Hot Definitions
  1. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
  2. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  3. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  4. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  5. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  6. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
Trading Center