As explained in an involuntary bankruptcy the company's officers can and most likily lose control of the company and a the creditor's committee and the trustee run the company.
An involuntary bankruptcy may be commenced for purposes of obtaining a chapter 7 liquidation or a chapter 11 reorganization against any debtor who is eligible for voluntary bankruptcy. An involuntary bankruptcy is commenced by the filing of a petition with the bankruptcy court. In an involuntary case, the petition must be signed by three creditors who do not have contingent claims or claims that are subject to a bona fide dispute. A bankruptcy or workout attorney can assist in contacting other creditors and preparing a petition in bankruptcy provided three creditors agree to proceed with the filing.
The filing of a petition for involuntary bankruptcy has the same effect as the filing of a petition for voluntary bankruptcy in two important respects. The filing creates a bankruptcy estate and it brings into effect the automatic stay, which prevents creditors from taking action to enforce their claims unless relief from the automatic stay is granted by the bankruptcy court.
The debtor has the right to contest the involuntary bankruptcy filing. In the event the bankruptcy is contested, the bankruptcy court will look at whether the debtor is paying its debts as they become due, and whether the debtor has assigned property for the benefit of creditors or suffered the appointment of a receiver to take charge of the debtor's property.
An involuntary bankruptcy is a valuable tool for a creditor who has limited remedies with which to collect a debt. For instance, where other creditors have levied on all of the assets of the debtor and the claims of those creditors equals or exceeds the value of the assets, a creditor who levies later will receive nothing. If the creditor can find two other creditors who have missed out in this manner, they can file an involuntary bankruptcy petition and force the other creditors who have levied on the assets to return the assets to the bankruptcy estate. The assets may then be distributed in a more equitable manner. Finally, the bankruptcy trustee has broad powers to investigate the financial affairs of the debtor to ascertain whether any preferential transfers of money or assets occurred prior to the filing.
An involuntary bankruptcy may be commenced for purposes of obtaining a chapter 7 liquidation or a chapter 11 reorganization against any debtor who is eligible for voluntary bankruptcy. An involuntary bankruptcy is commenced by the filing of a petition with the bankruptcy court. In an involuntary case, the petition must be signed by three creditors who do not have contingent claims or claims that are subject to a bona fide dispute. A bankruptcy or workout attorney can assist in contacting other creditors and preparing a petition in bankruptcy provided three creditors agree to proceed with the filing.
The filing of a petition for involuntary bankruptcy has the same effect as the filing of a petition for voluntary bankruptcy in two important respects. The filing creates a bankruptcy estate and it brings into effect the automatic stay, which prevents creditors from taking action to enforce their claims unless relief from the automatic stay is granted by the bankruptcy court.
The debtor has the right to contest the involuntary bankruptcy filing. In the event the bankruptcy is contested, the bankruptcy court will look at whether the debtor is paying its debts as they become due, and whether the debtor has assigned property for the benefit of creditors or suffered the appointment of a receiver to take charge of the debtor's property.
An involuntary bankruptcy is a valuable tool for a creditor who has limited remedies with which to collect a debt. For instance, where other creditors have levied on all of the assets of the debtor and the claims of those creditors equals or exceeds the value of the assets, a creditor who levies later will receive nothing. If the creditor can find two other creditors who have missed out in this manner, they can file an involuntary bankruptcy petition and force the other creditors who have levied on the assets to return the assets to the bankruptcy estate. The assets may then be distributed in a more equitable manner. Finally, the bankruptcy trustee has broad powers to investigate the financial affairs of the debtor to ascertain whether any preferential transfers of money or assets occurred prior to the filing.
