Legal Definitions - involuntary bankruptcy

Definition:Involuntary bankruptcy is a legal process where a debtor who is unable to pay their debts is forced into bankruptcy by their creditors. This process is supervised by a court and can result in the liquidation or reorganization of the debtor's assets for the benefit of their creditors.

Examples:

• If a business owes money to multiple creditors and is unable to pay its debts, those creditors can file a petition for involuntary bankruptcy against the business.
• If an individual owes a significant amount of debt to multiple creditors and is unable to pay, those creditors can also file a petition for involuntary bankruptcy against the individual.

These examples illustrate how involuntary bankruptcy can be initiated by creditors when a debtor is unable to pay their debts. The court then supervises the process to ensure that the debtor's assets are distributed fairly among their creditors.