Sometimes the difference between a successful
company and a defunct company is how they were
able to weather difficult financial times in their histories. Businesses that
are able to implement sound financial recovery plans often come
through tough economic periods fiscally lean and more prepared than ever to
meat the future. However, if a business fails to take the
necessary precautions they could end up facing the negative
consequences of an involuntary bankruptcy.
A business
becomes extremely vulnerable when income begins to
decrease at the same time that creditor obligations
remain constant. If an account becomes past due and a
creditor begins to worry that the business will not be
able (or willing) to pay his balance then they have the
legal right to file a commercial bankruptcy
petition in court on behalf of the offending company.
If the company has 12 or more debtors then
it becomes necessary for at least 3 of them to file
the bankruptcy petition. At this point the company has 20
days to file an objection. If the company chooses this option then
the case will go to trial. However, until the court has
made a final pronouncement a company can continue to
operate under normal business parameters.
Disclaimer: The information
provided in this site is not legal advice, but general
information on financial issues commonly encountered. We
shall not be liable for any errors in the content or for
any actions taken in reliance thereon. Please consult
your financial
advisor.
