BANKRUPTCY ASSISTANCE

Voluntary Bankruptcy vs Involuntary Bankruptcy

When a person files bankruptcy it can be voluntary or involuntary.  In general it is best to file voluntary bankruptcy, but you may run into the chance of an involuntary bankruptcy.  It can help for you to understand both types so that you can avoid involuntary bankruptcy and understand why you want voluntary bankruptcy instead.

Voluntary Bankruptcy Explained

A voluntary bankruptcy is when you choose to file bankruptcy and file a petition with the bankruptcy court.  You get to choose what chapter of bankruptcy you will file.  The individual options are usually Chapter 7 or Chapter 13.

You also get protection under the bankruptcy code.  An automatic stay is ordered and creditors must cease all collection actions against you.

You have the control over the voluntary bankruptcy.  You choose when to file at the time that is best for you.  You also get to ensure all your debts are listed and that everything is the way you want it.

Differences from Involuntary Bankruptcy

Involuntary bankruptcy is when your creditors force you to file bankruptcy. This involves 3 or more of your creditors filing an involuntary petition with the court.  This causes you to go into bankruptcy which prevents you from selling or transferring assets.

Many creditors will do this to stop loss from you selling or transferring assets.  Once your assets are gone they can not put liens against them or otherwise use your assets to recover money.  They force the bankruptcy because this prevents you from doing anything with your assets.

The rules are rather strict for involuntary bankruptcy, though.  Many people do not run into it unless they have huge debts and plenty of assets.

Why Voluntary is Better for You

It should seem fairly obvious why a voluntary bankruptcy is better for you than an involuntary bankruptcy.  However, you may not understand clearly the implications of an involuntary bankruptcy.

When your creditors think you are selling assets to prevent them from getting your money and can prove that to the court in order to get an involuntary bankruptcy petition then you will face some trouble.  It is against bankruptcy rules to sell assets or transfer assets for a certain time period before filing for bankruptcy.  When the court finds out that you are doing this they will begin to question your motives. 

You may end up having problems getting debts discharged and you will be forced to surrender some of the remaining assets you have.  It is not under your control and that can make the whole process a lot harder on you.