Involuntary Bankruptcy Case

A bankruptcy case of a debtor initiated by creditors (or, in the case of a general partnership, by a general partner) through the filing of an involuntary bankruptcy petition against the debtor.

If the debtor has 12 or more creditors, an involuntary case can only be filed if (1) three or more creditors are willing to join in the filing, (2) their claims are not contingent as to liability or subject to a bona fide dispute as to liability or amount, and (3) the total of their claims is at least $14,425 (as of publication) (by statute, this figure is subject to periodic increases) more than the value of any collateral they hold. If the debtor has less than 12 creditors, an involuntary case can be filed by a single creditor whose claim or claims otherwise meets these same requirements.

If a court dismisses an involuntary petition because it contains a materially false statement, it can impose costs and attorneys’ fees on the petitioners and can impose actual and punitive damages on a petitioner that “filed the petition in bad faith.”

Bankruptcy Code § 303. See also Involuntary Bankruptcy Petition.

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