How Does Involuntary Bankruptcy Proceed in Court?
The involuntary bankruptcy begins when the creditors file a petition in bankruptcy court. The petition must be served on the debtor, along with a summons. The case then proceeds as follows: • The debtor must answer the petition within 20 days, raising any defenses or objections. • If the debtor fails to respond to the petition within 20 days, the bankruptcy court may order relief on the involuntary petition by default. • If the debtor files an answer and contests the petition, the court will hold a hearing and consider evidence. At the hearing, the creditors will have the burden of proving one or both of the grounds set forth above. • If sufficient grounds exist, the bankruptcy court will enter an order of relief allowing the bankruptcy to proceed.Why Creditors File Involuntary Bankruptcy Petitions There are a couple of reasons why unsecured creditors may wish to force a debtor into involuntary bankruptcy. First, as Parsons notes, the creditors are usually unsecured or undersecured in
