Requirements For Filing an Involuntary Bankruptcy Petition – San Diego Bankruptcy Attorney

Creditors have a number of options in their arsenal when seeking to get repaid.  One of those options is to file an involuntary bankruptcy petition against a person or company that owes them money.  There are many reasons why creditors may want to initiate involuntary bankruptcy proceedings:

  1. Creditors may seek to avoid insider transfers made before the filing of the involuntary bankruptcy;
  2. Creditors may seek to avoid certain fraudulent transfers;
  3. Creditors may seek to avoid preferential payments made before the filing of the involuntary bankruptcy; and
  4. Creditors may want to preserve assets which may be used to pay them back.

However, there are certain requirements that must be met in order to file an involuntary bankruptcy petition.  These requirements are codified in the United States Bankruptcy Code at 11 U.S.C. §303 and generally include:

  1. If the alleged bankruptcy debtor has 12 or more creditors, the involuntary petition must be filed by at least 3 creditors, who must be owed, in the aggregate, at least $15,325.00 in unsecured debt.
  2. If the alleged bankruptcy debtor has fewer than 12 creditors, the involuntary petition may be filed by only a single creditor, so long as that creditor is owed at least $15,325.00 in unsecured debt.
  3. The debts owed to the petitioning creditors must not be contingent or subject to bona fide disputes, which includes disputes related to both liability and amount.

It should be noted that the above requirements apply only when the alleged debtor is a person.  The rules as to partnerships are different and are codified at 11 U.S.C. §303(b)(3).

After an involuntary bankruptcy petition is filed, an alleged debtor has 21 days to respond to the involuntary petition.  If an alleged debtor does respond in a timely manner, the Court will generally hold a hearing and determine whether the involuntary petition is appropriate, depending on the facts of the case.

If you have any questions in connection with an involuntary bankruptcy filing, please contact the VC Law Group, LLP via telephone at (858) 519-7333 or email at info@thevclawgroup.com.