Category Archives: Involuntary Bankruptcy Requirements

Involuntary Bankruptcy

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Yes, your creditors can file bankruptcy for you without your permission. Section 303 of the Bankruptcy Code governs involuntary bankruptcy. These cases are very rare and even rarer if filed against an individual. If may be difficult to find a bankruptcy lawyer that has experience filing one of these cases. Mostly businesses are forced into bankruptcy by their creditors. In involuntary case may only be filed under Chapter 7 or Chapter 11 of the Bankruptcy Code.

One unsecured creditor can file the petition for bankruptcy against the company or individual and then at least two more unsecured creditors must join the petition for a total of $14,425 in unsecured non-contingent claims and not subject to a bona fide dispute as to liability or amount.

After the initial petition is filed and the required about the creditors joins the petition the next issue is whether the case will be allowed to continue or be dismissed. If the debtor does not respond to the petition being filed then the bankruptcy case will continue and the debtor will have no choice but to participate. If the debtor does oppose the filing then a hearing will be held to determine if the bankruptcy case should continue.

If you are considering filing an involuntary case against a nonpaying company or individual be careful. You may have to file a bond to indemnify the debtor for attorney fees and costs or more that the court could allow. If the petition is dismissed for reasons other than on consent of all petitions and the debtor, the court may grant a judgment against the filing creditors for reasonable attorney’s fees, costs, any damages proximately caused by the petition filing and even punitive damages.

If you are owed money and the individual or company that owes the money is not paying its debts regularly you may consider filing an involuntary bankruptcy case. You will need to know that there are also other creditors in the same position as you to join the petition though. Choose wisely the bankruptcy attorney you retain to lead you down this path. It is a difficult and rare area of practice for bankruptcy filers. Please note that you may not force an individual into a Chapter 13 bankruptcy case. Before filing a petition for bankruptcy against an individual you should research the assets of the individual. If they have few assets you may have put yourself in a worse position to be paid on your claim. At the same time there are some advantages. Think about the 90-day preference period. This is the 90-days prior to the bankruptcy petition being filed. If the alleged debtor made a large payment to some other creditor during the 90-days prior, then the payment could be avoided for the benefit of all creditors. Of course everything depends upon the circumstances and this article only addresses some general issues to consider.