Voluntary Proceedings

Most bankruptcy petitions are voluntary. Any individual whom is eligible can be a debtor under a chapter.  Said individual may file under it. The debtor does not need to be insolvent, and no minimum debt or number of creditors is required.

A voluntary petition results in an automatic order for relief. In the order, the court assumes exclusive authority over the case. The mandatory creditors’ meeting is held within a reasonable time after the order.

Amendments to the Bankruptcy Code in 2005 made filing more extensive. A few additional requirements are:

  • A statement of affairs
  • A schedule of income and expenses
  • Lists of creditors and property
  • Itemized monthly net income

Involuntary Proceedings

An involuntary petition may be filed against an eligible debtor exclusively under Chapter 7 or chapter 11. The number or timing of involuntary petition is not limited. However, an involuntary petition cannot be filed against the following:

  • Farmers
  • Banks
  • Insurers
  • Nonprofit corporations
  • Railroads
  • Persons who owe less than $15,775

Filing an involuntary petition results in an automatic stay but does not result in an automatic order for relief. If the debtor does not oppose the petition, however, the court will enter an order for relief.

If the debtor opposes the petition, the court must hold a hearing, and the petitioner must post a bond to compensate a debtor if the case is dismissed.

If the case is dismissed, the creditors may have to pay the debtor’s costs, attorney’s fees, and damages caused when the trustee took possession of the debtor’s property. A petition who acted in bad faith nay have to pay punitive damages affecting the debtor’s reputation.

Debtor Rights and Duties

The debtor may continue to use, acquire, and dispose of his or her property until the court orders otherwise. The debtor also may incur new debts and operate a business. However, the debtor must comply with various requirements, which include:

  • Attending and submitting to all court-scheduled examinations,
  • Testifying when called into court as a witness in a hearing
  • Informing the trustee in writing of the location of all real property in which the debtor has interest
  • Receiving credit counseling


Within a reasonable time after the order for relief, which may be delayed in an involuntary case, the U.S. Trustee (an administration for a Federal district court) appoints an interim trustee. The interim trustee has the following responsibilities:

  • Represent the debtor’s estate
  • Investigate the debtor’s financial affairs
  • Hold the first meeting of creditors

Power of Trustee

This is granted for purposes of collecting and accounting for property.  A court may allow the debtor to file a bond to reclaim property from the trustee as well as granting the following powers:

  • Performing investigations on the case
  • Setting aside fraudulent conveyances and certain other property transfers
  • Assuming and performing an unperformed contract or unexpired lease, rejecting it, or assigning it to a third party – rejection is assumed unless the trustee acts within 60 days after the order for relief
  • Operating the debtor’s business
  • Selling, using, or leasing estate property
  • Investing estate money
  • Hiring professionals services for a reasonable compensation with the court’s approval
  • Filing reports
  • Objecting to creditor claims
  • Objecting to a discharge in a proper case
  • Distributing assets and closing the estate


Originally posted 2018-07-24 20:40:12.

© 2018 Alexander Tax Defense. All Rights Reserved.



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