The Law Offices of Jonathan Stone
Hackettstown law firm serving clients throughout New Jersey
Call Today 800-491-5622
Areas & Topics

How can your creditors force you into bankruptcy?

The common school of thought is that the primary benefit of a Chapter 11 bankruptcy is that it allows business owners in Hackettstown to continue to operate their companies while reorganizing their infrastructures and simultaneously stopping creditors from taking actions against them. Yet creditors may also view a Chapter 11 bankruptcy as a way of forcing a debtor company to stop avoiding its liabilities. Thus, your creditors can indeed try to force you and your company into bankruptcy. 

How can they do this? It depends on the number of creditors you have. According to Section 303 of the U.S. Bankruptcy Code, if you have more than 12 creditors, than at least three of those creditors must jointly file the petition against you. These creditors must have claims against you totaling at least $15,775 if unsecured or an equal amount secured through liens. Their claims must also not be contingent upon liability or subject to any bona fide dispute. 

What if you do not have 12 creditors? In that case, only creditor who meets the aforementioned requirements is needed to initiate the petition. Additional creditors may choose to join in on the case later. 

Simply filing the petition is not enough to commence a bankruptcy case against you. For the case to commence, it must be shown that your company has indeed not been paying its bills or, within 120 days prior to the filing of the petition a custodian was given control of substantial amount of your business' assets and property as part of the enforcement of a lien. 

Your creditors can attempt to force you into either a Chapter 7 or Chapter 11 bankruptcy. If they seek a Chapter 7, you can actually respond by filing a voluntary Chapter 11 bankruptcy and assume control of the case as the debtor in possession. 

No Comments

Leave a comment
Comment Information

Contact

The Law Offices of Jonathan Stone
490 Schooley's Mountain Road
Building 3A
Hackettstown, NJ 07840

Toll Free: 800-491-5622
Map & Directions