Question

When does an involuntary bankruptcy occur?

A) When the debtor's credit covers all debts
B) When the debtor chooses to file for bankruptcy
C) When creditors initiate the bankruptcy process
D) When the debtor's assets are sold

Answer 1

An involuntary bankruptcy occurs when creditors initiate the bankruptcy process. It is a legal process where creditors force a debtor into bankruptcy in order to recover the debts owed to them.

Step-by-step explanation:

An involuntary bankruptcy occurs when creditors initiate the bankruptcy process. It is a legal process where creditors force a debtor into bankruptcy in order to recover the debts owed to them. This typically happens when the debtor is unable to pay their debts and the creditors take legal action to recover the money owed.

For example, if a company owes money to multiple creditors and is unable to meet its financial obligations, the creditors can file a petition with the court to start the involuntary bankruptcy process. The court will then determine if the debtor should be declared bankrupt and the assets may be sold to repay the creditors.