Usually, when an individual or business is forced into bankruptcy, it is because they cannot pay their debt. This is usually brought on by a creditor who has filed a lawsuit against the company, or has declared the company in default under the loan documents. In addition, creditors can only collect their debt through bankruptcy proceedings. If a creditor attempts to collect outside of bankruptcy, they may find themselves in legal trouble. Read more :

What happens if I file bankruptcy?

If a creditor decides to force an individual or business into bankruptcy, they must petition a court. The judge will determine if the bankruptcy will move forward. Once the case is filed, the debtor has 21 days to respond to the petition. If the debtor does not respond, a bankruptcy proceeding will be initiated. If the court finds in the creditor’s favor, the debtor will have to pay the creditor’s costs, including attorney fees.

The main difference between forced bankruptcy and involuntary bankruptcy is that involuntary bankruptcy is often brought on by a business or an individual that has the resources to pay their debt. Involuntary bankruptcy is usually only brought against businesses or wealthy individuals.

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