Creditor

More than 90 percent of bankruptcy proceedings are voluntary. They are initiated by the debtor, who files a petition with the appropriate federal court.


A bankruptcy trustee then collects and liquidates the debtor's nonexempt property for the benefit of the unsecured creditors. Secured creditors are not affected by bankruptcy liquidations because they have taken collateral (such as a home mortgage) to ensure repayment of debts.


Once distribution to unsecured creditors occurs, the court discharges the debtor unless that person's prior behavior justifies denying the discharge or granting it with certain specific statutory exceptions.


In order to limit or deny the discharge, the creditor must prove that the debtor has obtained credit by fraudulent practices or has engaged in other prohibited behavior.


Creditors can file an involuntary bankruptcy petition against a debtor, alleging that the debtor is
“generally not paying” debts, but this type of proceeding rarely occurs.