What is forced bankruptcy?
Forced bankruptcy is when the creditors are unable to receive payment from you to satisfy a substantial debt. In such a case, the creditors could file an involuntary or forced bankruptcy case against your business and you have some 20 days following this development, to file objections. If no objections are filed, the bankruptcy comes into force. If you do file objections, the case can go to trial.
Though most commercial bankruptcy are voluntary, creditors can unite to trigger forced bankruptcy provided there is a minimum number of creditors in this alliance, and the amount of debt is prescribed by the applicable law. These vary from case to case, and sometimes even from State to State. If the move against the debtor be found without merit, the creditors would have to pay the costs of the trial and also incur heavy fines.
According to the law, if there are more than 12 creditors for a small business, any 3 could form an alliance to initiate forced bankruptcy.
Source: What is forced bankruptcy?
