Creditors are often compelled to commence expensive and time consuming litigation to first prosecute their claims and then locate and seize a debtor’s assets. During this lengthy and costly process, the debtor’s assets are dissipated and the creditor may realize only a fraction of its claim. The Bankruptcy Code1 allows a trustee to liquidate a debtor’s assets in a cost-effective, expeditious manner. Because of this, involuntary bankruptcy is a powerful tool that can expedite and maximize payments to affected creditors.
Filing an Involuntary Petition. An involuntary bankruptcy is commenced by the filing of an involuntary petition by a “petitioning” creditor.2 The petition sets forth requirements for the creditor to satisfy and can be filed against an individual or business entity, other than “a farmer, family farmer, or a corporation that is not a moneyed, business, or commercial corporation” and only under Chapters 7 or 11 of the Bankruptcy Code.3
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