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

The difference between a voluntary and involuntary bankruptcy filing is based on who initiates the filing process. A voluntary bankruptcy filing is when the debtor (the person who owes the money) initiates the filing. An involuntary bankruptcy filing is when creditors (the people/entity to whom the debtor owes money) initiate the filing. In West Virginia, a voluntary bankruptcy filing can be done under Chapters 7, 11, or 13 of the U.S. Bankruptcy Code. Chapter 7 is for liquidation—all of the debtor’s assets are sold or liquidated and the proceeds are used to pay creditors. Chapter 11 is a reorganization that allows a debtor to restructure their debt into a more manageable payment plan. Lastly, Chapter 13 is a repayment plan where the debtor can make arrangements to repay all or part of their debt over a period of three or five years. In contrast, an involuntary bankruptcy filing in West Virginia is limited to Chapter 7. The creditors must prove that the debtor is unable to pay their debts when due and show that the debtor has committed an act of bankruptcy—by either failing to obey an earlier court order to pay a debt, or by failing to respond to a debt discovery request. If the creditors can establish that the debtor has defaulted, they can file an involuntary bankruptcy proceeding to force the debtor to liquidate their assets to pay their creditors.

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

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