In most situations, bankruptcy is a voluntary option that a debtor chooses to pursue when they feel overwhelmed by their financial obligations. Under certain circumstances, though, creditors can seek a court order compelling a debtor to enter bankruptcy proceedings whether they want to go through that process or not.
Involuntary bankruptcy in Jacksonville is not particularly common, as it puts a significant burden of proof on the creditors pursuing it, and those creditors could face serious sanctions if the Court rejects their petition. If you are a debtor facing involuntary bankruptcy proceedings, you may need help from a skilled attorney to contest the claim and effectively preserve your financial health.
What Is Needed for an Involuntary Bankruptcy Petition?
Under federal bankruptcy law, a single creditor can only file an involuntary bankruptcy petition against a debtor in Jacksonville if all the following conditions apply:
- The debtor has 11 or fewer total creditors
- The claim(s) in question is “not contingent as to liability”
- The claim(s) in question has an aggregate value of at least $15,325
- There is no dispute over how much the debtor owes or whether they are liable for the debt in question
- There is no statute of limitations that would bar collection of the debt
If a debtor has twelve or more creditors, a petition for involuntary bankruptcy must include at least three creditors as filing parties. The individual creditor pursuing the petition has the burden of proving this “numerosity” requirement.
Once a court approves a petition for involuntary bankruptcy, the debtor in question has 21 days to either accept or contest the petition. A failure to answer the Court’s notice is presumed to signify consent to the bankruptcy. Either way, a “gap period” begins once the petition is approved and continues until there is a court order for bankruptcy relief. During this period, an automatic stay on collection efforts goes into effect, and additional creditors can join the petition if they wish to do so. A lawyer experienced in handling these cases could provide further information about this process.
Requirements for Creditors to Force Involuntary Bankruptcy
If an involuntary bankruptcy petition goes to court in Jacksonville, the petitioning creditors must prove that the debtor is not paying their debts on time and that there is no “bona fide dispute” over the amount owed or over liability for that amount, as per 11 U.S. Code §303(h). However, federal law does not offer any specific definitions for what “generally not paying debts” or a “bona fide dispute” entails, so a court may consider any factors it determines as relevant when deciding whether a petition is valid.
An attorney could challenge the idea that there was no dispute over the debts in question, and a particular creditor was simply refusing to pay those debts without cause. If an involuntary bankruptcy petition is ultimately unsuccessful, the creditor who filed it may be liable to pay a cash judgment to the targeted debtor, including attorney’s fees, compensatory damages, and sometimes punitive damages.
A Jacksonville Attorney Could Help Fight Involuntary Bankruptcy
Because of the severe consequences they could face for a failed petition and how hard it can be to meet the required conditions, it is generally rare for creditors to petition for involuntary bankruptcy in Jacksonville. However, it is not unheard of for creditors to take this extreme step, nor is it easy for a debtor to defend their best interests in this kind of proceeding without legal counsel.
To effectively avoid being forced to go into bankruptcy by your creditors, you will likely need assistance from a seasoned attorney. Call today to discuss your circumstances and see what your legal options may be.