Can Creditors Initiate Bankruptcy Proceedings Against a Borrower Who Defaults on a Loan?
Creditors cannot typically force consumer bankruptcies. However, they can take action against businesses in Oklahoma by filing an involuntary petition for bankruptcy.
Involuntary bankruptcy actions work differently from those initiated by the debtors themselves. According to tips offered by the United States Department of Justice, creditors can file only under Chapter 7 or Chapter 11 business bankruptcy. However, many other rules govern involuntary bankruptcy cases. One such rule is that, if 12 or more creditors exist, a creditor needs to join with at least two other creditors, in order to initiate an involuntary action. After commencement, that creditor can only seek court dismissal after notifying all creditors.
When a debtor lapses or defaults on the repayment of credit issued, an involuntary bankruptcy action is not always the best legal option. An experienced Oklahoma bankruptcy lawyer can take informal or formal legal action on your behalf to renegotiate the terms of the loan, or otherwise help put the business back on track to repay the loan. Even though you can request a payment of administrative expense as part of your filing, you cannot recoup the time and effort you may spend pursuing your bankruptcy claim.
No matter who initiates bankruptcy, creditors can benefit by having representation from a knowledgeable advocate. The law firm of Eller and Detrich, A Professional Corporation has more than three decades of experience helping protect creditor rights in consumer and business bankruptcy proceedings. Contact us to learn how we can help.