Requirements and Risks in Petitioning for an Involuntary Bankruptcy Case

Abstract

This article provides an overview of the requirements petitioning creditors must satisfy to commence an involuntary process and discusses certain circumstances under which an involuntary filing may be contested by a putative debtor.

Aside from the traditional path of pursuing a judgment against the putative debtor in state court, one or more creditors—if certain criteria are met—can force a delinquent debtor into a bankruptcy proceeding through the filing of an involuntary bankruptcy petition. Commencing an involuntary bankruptcy is a powerful remedy to secure payment. However, involuntary bankruptcy cases account for less than one percent of bankruptcy proceedings in the United States each year.