involuntary bankruptcy(redirected from Involuntary Bankruptcies)
The process where creditors petition the court to begin bankruptcy proceedings on a debtor. Also see Voluntary bankruptcy.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A situation in which a creditor may force a debtor into bankruptcy. A creditor may file for involuntary bankruptcy if the debtor has become severely and consistently delinquent or if a custodian has been appointed for the debtor in the previous six months. After the petition is filed, the debtor usually has 20 days in which to contest it. If the debtor objects to involuntary bankruptcy, he/she must show either that payments are not as delinquent as claimed or that he/she is taking steps to restore solvency. If the debtor does not show this, the bankruptcy court can force liquidation to repay the creditor(s).
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Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.