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Who Can Start A Bankruptcy?

Any person, partnership, corporation, or business trust may file a bankruptcy. If the person or entity who owes the money, referred to as the debtor, files a petition and starts the bankruptcy, it is called a voluntary bankruptcy. The people or entities who are owed money, referred to as the creditors, can also start the bankruptcy by filing a petition against the person or entity who owes them money. This is called an involuntary bankruptcy. In an involuntary bankruptcy, the debtor gets a chance to contest the petition and contend it should not be in bankruptcy.

Voluntary cases can be filed under chapters 7, 9, 11, 12, 13, and 15. Involuntary cases can only be filed under chapters 7 and 11. Certain types of entities, such as banks and insurance companies, may not be eligible to file bankruptcy; however, almost all other entities can file a bankruptcy. A business that is NOT a partnership, corporation or business trust, cannot file a separate bankruptcy on its own. Those assets and debts would be included in the personal bankruptcy of the owner(s).

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