This blog often addresses the careful decision making that may or may not lead a debtor to an individual bankruptcy in Wisconsin. But in certain circumstances under the bankruptcy laws of Wisconsin, a creditor can go to federal court to force a debtor into Chapter 7. This is called an involuntary bankruptcy, but it is not all that common because it comes with various technical strings attached.

Under the law, if a debtor is on the hook for about $10,000 or more to 12 or more creditors, three of the creditors must join forces to file the involuntary bankruptcy petition. If the debtor has less than 12 creditors, then only one of them need file, again provided at least $10,000 in debt is at issue. Also, the creditor(s) must provide evidence that the debt or debts in question are undisputed and that the debtor is in default on the obligations.

Why would a creditor go to all the trouble of filing involuntary bankruptcy papers against a consumer? Perhaps creditor might be concerned that a consumer is going on a spending spree (perhaps in anticipation of a bankruptcy filing down the road) rather than pay overdue bills. Another reason might be a concern that the debtor is hiding assets or parceling out money or property so that there is nothing left for creditors to seize. But going in this direction can be a risky proposition for the creditor. If the bankruptcy court decides that the involuntary petition was filed in bad faith or has no basis, the petition can be dismissed and the court can turn the tables on the creditor and order it to pay damages and legal fees to the debtor. By the way, farmers can’t be dragged into an involuntary bankruptcy by law, so if you’re a farmer, that’s one less thing you have to worry about in today’s difficult economy. Nor does an involuntary bankruptcy apply to a Chapter 13 bankruptcy in Milwaukee or elsewhere in Wisconsin.

The bankruptcy court gives the debtor an opportunity to respond to an involuntary petition before determining which, if any creditors are entitled to debt relief in Wisconsin. If you’ve been targeted for an involuntary bankruptcy, you need the services of a Wisconsin bankruptcy lawyer right away. A Wisconsin bankruptcy attorney can size up your situation and put together a response to the court that will, if appropriate, contest the involuntary bankruptcy attempt and otherwise protect your financial interests from overreaching creditors.