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Who can start a bankruptcy?

Any person, and almost any partnership, corporation, or business trust, may file a bankruptcy petition. Certain types of entities, such as banks and insurance companies, may not be eligible for bankruptcy protection, but almost all other entities who are not individuals can file under either chapter 7, chapter 11, or chapter 12. A business that is not a partnership, corporation, or business trust cannot file a separate bankruptcy petition on its own, but must be filed as an individual bankruptcy under the name(s) of the owner(s).

If the person or entity who owes the debts (the debtor) files the petition, it is called a voluntary petition. A voluntary petition can be filed under chapter 7, 9, 11, 12, or 13.

The people or entities that are owed money (the creditors) may also have the right to file a petition against a person or entity which owes them money and is not paying. This is called an involuntary petition. There are certain restrictions upon the creditors' ability to file an involuntary petition. In an involuntary case, the debtor is allowed to contest the petition and contend that it should not be in bankruptcy. The court can impose penalties against the creditors who filed the case if the debtor proves that the involuntary petition should not have been filed. An involuntary petition cannot be filed against joint debtors, and can be filed only under chapter 7 or chapter 11 (11 U.S.C. § 303).

Only a family farmer or family fisherman may file a chapter 12 petition. In addition, there are certain debt limitations in a chapter 12 case. See 11 U.S.C. § 101(18) and (19A).

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