Section 303: Involuntary Cases

Title 11 of the United States Code - Bankruptcy
CASE ADMINISTRATION – CHAPTER 3

Involuntary Cases - Section 303

11 USCS § 303

(a) An involuntary case may be commenced only under chapter 7 or 11 of this title [11 USCS §§ 701 et seq. or 1101 et seq.], and only against a person, except a farmer, family farmer, or a corporation that is not a moneyed, business, or commercial corporation, that may be a debtor under the chapter under which such case is commenced.

(b) An involuntary case against a person is commenced by the filing with the bankruptcy court of a petition under chapter 7 or 11 of this title [11 USCS §§ 701 et seq. or 1101 et seq.]--

   (1) by three or more entities, each of which is either a holder of a claim against such person that is not contingent as to liability or the subject of a bona fide dispute as to liability or amount, or an indenture trustee representing such a holder, if such noncontingent, undisputed claims aggregate at least $ 13,475 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims;

   (2) if there are fewer than 12 such holders, excluding any employee or insider of such person and any transferee of a transfer that is voidable under section 544, 545, 547, 548, 549, or 724(a) of this title [11 USCS § 544, 545, 547, 548, 549, or 724(a)], by one or more of such holders that hold in the aggregate at least $ 13,475 of such claims;

   (3) if such person is a partnership--

      (A) by fewer than all of the general partners in such partnership; or

      (B) if relief has been ordered under this title [11 USCS §§ 101 et seq.] with respect to all of the general partners in such partnership, by a general partner in such partnership, the trustee of such a general partner, or a holder of a claim against such partnership; or

   (4) by a foreign representative of the estate in a foreign proceeding concerning such person.

(c) After the filing of a petition under this section but before the case is dismissed or relief is ordered, a creditor holding an unsecured claim that is not contingent, other than a creditor filing under subsection (b) of this section, may join in the petition with the same effect as if such joining creditor were a petitioning creditor under subsection (b) of this section.

(d) The debtor, or a general partner in a partnership debtor that did not join in the petition, may file an answer to a petition under this section.

(e) After notice and a hearing, and for cause, the court may require the petitioners under this section to file a bond to indemnify the debtor for such amounts as the court may later allow under subsection (i) of this section.

(f) Notwithstanding section 363 of this title [11 USCS § 363], except to the extent that the court orders otherwise, and until an order for relief in the case, any business of the debtor may continue to operate, and the debtor may continue to use, acquire, or dispose of property as if an involuntary case concerning the debtor had not been commenced.

(g) At any time after the commencement of an involuntary case under chapter 7 of this title but before an order for relief in the case, the court, on request of a party in interest, after notice to the debtor and a hearing, and if necessary to preserve the property of the estate or to prevent loss to the estate, may order the United States trustee to appoint an interim trustee under section 701 of this title [11 USCS § 701] to take possession of the property of the estate and to operate any business of the debtor. Before an order for relief, the debtor may regain possession of property in the possession of a trustee ordered appointed under this subsection if the debtor files such bond as the court requires, conditioned on the debtor's accounting for and delivering to the trustee, if there is an order for relief in the case, such property, or the value, as of the date the debtor regains possession, of such property.

(h) If the petition is not timely controverted, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed. Otherwise, after trial, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed, only if--

   (1) the debtor is generally not paying such debtor's debts as such debts become due unless such debts are the subject of a bona fide dispute as to liability or amount; or

   (2) within 120 days before the date of the filing of the petition, a custodian, other than a trustee, receiver, or agent appointed or authorized to take charge of less than substantially all of the property of the debtor for the purpose of enforcing a lien against such property, was appointed or took possession.

(i) If the court dismisses a petition under this section other than on consent of all petitioners and the debtor, and if the debtor does not waive the right to judgment under this subsection, the court may grant judgment--

   (1) against the petitioners and in favor of the debtor for--

      (A) costs; or

      (B) a reasonable attorney's fee; or

   (2) against any petitioner that filed the petition in bad faith, for--

      (A) any damages proximately caused by such filing; or

      (B) punitive damages.

(j) Only after notice to all creditors and a hearing may the court dismiss a petition filed under this section--

   (1) on the motion of a petitioner;

   (2) on consent of all petitioners and the debtor; or

   (3) for want of prosecution.

(k) [Deleted]

(l) (1) If--

      (A) the petition under this section is false or contains any materially false, fictitious, or fraudulent statement;

      (B) the debtor is an individual; and

      (C) the court dismisses such petition,

   the court, upon the motion of the debtor, shall seal all the records of the court relating to such petition, and all references to such petition.

   (2) If the debtor is an individual and the court dismisses a petition under this section, the court may enter an order prohibiting all consumer reporting agencies (as defined in section 603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f))) from making any consumer report (as defined in section 603(d) of that Act [15 USCS § 1681a(d)]) that contains any information relating to such petition or to the case commenced by the filing of such petition.

   (3) Upon the expiration of the statute of limitations described in section 3282 of title 18 [18 USCS § 3282], for a violation of section 152 or 157 of such title [18 USCS § 152 or 157], the court, upon the motion of the debtor and for good cause, may expunge any records relating to a petition filed under this section.

Sagaria Law is proud to provide the US Bankruptcy Code, Title 11 to all potential clients and legal professionals.  Sagaria Law follows a “knowledge is power” approach to bankruptcy.  You will not see The Bankruptcy Code like this on other bankruptcy sites.

Our experienced bankruptcy attorneys are available to you in any of our 9 bankruptcy office locations, such as our corporate bankruptcy headquarters located in downtown San Jose. Our South Bay Area bankruptcy law firm provides bankruptcy services to all of Santa Clara County as well as supports our other offices in 9 other counties and locations.  We look forward to working with you!

Sagaria Law is proud to provide the US Bankruptcy Code, Title 11 to all potential clients and legal professionals.  Sagaria Law follows a “knowledge is power” approach to bankruptcy.  You will not see The Bankruptcy Code like this on other bankruptcy sites.

Our experienced bankruptcy attorneys are available to you in any of our 9 bankruptcy office locations, such as our corporate bankruptcy headquarters located in downtown San Jose. Our South Bay Area bankruptcy law firm provides bankruptcy services to all of Santa Clara County as well as supports our other offices in 9 other counties and locations.  We look forward to working with you!

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