What is the difference between a voluntary and involuntary bankruptcy filing?

A voluntary bankruptcy filing occurs when the individual, or debtor, makes the decision to file for bankruptcy. This type of filing is utilized to reduce or eliminate debt. In an involuntary bankruptcy filing, the debtor’s creditors must petition the court in order to initiate the filing. An involuntary bankruptcy is designed to help debtors who are unable to pay their debts by allowing creditors to collect what they are owed of the debtor’s assets. In Indiana, both voluntary and involuntary bankruptcy filings can be filed under either Chapter 7 or Chapter 13 of the Bankruptcy Code. A Chapter 7 filing requires the debtor to liquidate some of their assets to pay creditors. This type of filing is usually used for individuals with few assets and high debts. A Chapter 13 filing does not require the debtor to liquidate any assets, but instead requires them to make a payment plan over a period of three to five years to creditors. Both voluntary and involuntary bankruptcy filings require the debtor to meet certain eligibility requirements. Generally, to file for bankruptcy, the debtor must be insolvent, have no way to repay their debt, and have not filed for bankruptcy in the last six to eight years. However, with an involuntary filing, the debtor must meet additional qualifications, such as having at least three creditors, and the debts must be owed to at least three different creditors. In summary, the biggest difference between a voluntary and an involuntary bankruptcy filing is the way in which they are initiated. A voluntary filing is initiated by the debtor, while an involuntary filing is initiated by the debtor’s creditors. Additionally, debtors who file for voluntary bankruptcy are not required to liquidate their assets in order to pay creditors, while those who file for involuntary bankruptcy must do so.

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What is the difference between a voluntary and involuntary bankruptcy filing?

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