What’s The Difference Between Voluntary And Involuntary Bankruptcy?

person filing for voluntary bankruptcy

When it comes to Chapter 7 bankruptcy, there are two main ways that legal proceedings are initiated. You may have heard about voluntary and involuntary bankruptcy, but many people wonder about the difference between these two methods. Voluntary bankruptcies are far more common in Chapter 7 cases. If you have questions about the legal bankruptcy process, our knowledgeable law firm has the answers you need! Read this blog to learn more about the different types of bankruptcy or contact an Orange County Chapter 7 Bankruptcy Lawyer today for high-quality legal counseling.


As you might be able to guess from the name, voluntary bankruptcy is when someone (or a company) chooses to file for bankruptcy on their own accord, rather than being forced to. The debtor (person/company who owes money) can file this type when they are unable to pay off their debts and there are no other options. Voluntary is the most common kind of bankruptcy.

Alternatively, involuntary bankruptcy is basically when someone else (usually a creditor) files for bankruptcy because the debtor is unable to pay back their debts. This type is much rarer than voluntary. Creditors will file for involuntary bankruptcy to get back what the debtor owes them.


There are certain exceptions for who or what a creditor is allowed to file involuntary bankruptcy for. These exceptions include:

  • Credit unions
  • Banks
  • Farmers
  • Nonprofit groups
  • Savings and loan institutions

So, even if any of these institutions owe a creditor, that creditor won’t have the option to file for involuntary bankruptcy.


If a creditor files for involuntary bankruptcy against you, you may contest the claim rather than file for bankruptcy. You can hire a bankruptcy lawyer to help you contest the claim. You can also convert to a Chapter 13 bankruptcy instead if that is a better option for you.


You might have heard that there’s a third type of bankruptcy. Technical bankruptcy is a situation in which a person or company defaults on their debt payments, but nobody has technically filed for bankruptcy yet. This is essentially the time period before the debtor or creditor initiates a bankruptcy case. A person or company can be technically bankrupt but not legally bankrupt.

Are you considering filing for Chapter 7 bankruptcy in New York? Are you seeking a highly experienced bankruptcy attorney who has your best interests in mind? Look no further because the Law Offices of Michael D. Pinsky, PC are on your side! Contact our effective team today for an initial consultation.

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