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Simple English definitions for legal terms
involuntary bankruptcy
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A quick definition of involuntary bankruptcy:
Involuntary bankruptcy is a legal process where a debtor who is unable to pay their debts is forced into bankruptcy by their creditors. This means that the creditors file a petition with the court to start the bankruptcy process. There are two types of bankruptcy: liquidation and rehabilitation. In liquidation, the debtor's assets are sold to pay off their debts, while in rehabilitation, the debtor keeps their assets and pays off their debts over time. Bankruptcy law deals with the rights of debtors and creditors in these situations. Being bankrupt means that a person or company is unable to pay their debts and obligations as they become due.
A more thorough explanation:
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.