There are two forms of bankruptcies- voluntary and involuntary. Although rare, an involuntary bankruptcy occurs when a creditor legally forces bankruptcy proceedings onto a debtor. In effect, a creditor can petition a U.S. Bankruptcy Court to place a debtor into bankruptcy, but before they are successful, certain legal criteria has to be met by the petitioning creditors or the case will be dismissed by the receiving court.
In a twist of roles, a group of 25 individuals recently petitioned the United States Bankruptcy Court for the District of Colorado to place Bank of America into involuntary bankruptcy. The petitioners claimed the bank owed them specified sums of money totaling $60 million.
Michael E. Romero, a bankruptcy judge for the District Bankruptcy Court of Colorado, received the petition, heard responses from both sides, and made a ruling to dismiss the bankruptcy case on a signed docket dated June 21, 2011. In addition, Judge Romero ordered the Bank of America had until July 8, 2011 to file a motion requesting an award of costs, fees, and damages pursuant to bankruptcy code 303 (i)(1).
What the ruling means to the 25 filing individuals, who filed the petition Pro Se, is not only did they lose their bid to throw Bank of America into bankruptcy, they most likely will now be responsible for all the legal fees plus whatever damages Judge Romero determines the actions of the filers warrants. The latter action taken by Judge Romero is probably one good reason forcing an involuntary bankruptcy onto a debtor is not always a good idea, making these types of bankruptcy filings rare.
Bank of America raised four questions in its defense. They questioned: whether or not the Court had jurisdiction to hear the case; whether or not the petitioning creditors were eligible to file an involuntary petition; whether or not Bank of America was eligible to be a debtor under an involuntary filing for a Chapter 7 or Chapter 11 bankruptcy; and whether or not the petition was filed in good faith.
Judge Romero made no ruling on the question of jurisdiction since he found other grounds to dismiss the case. He found the petitioners were ineligible to file the petition based on the lack of documentation they were indeed creditors having a legitimate claim under bankruptcy law. In a nutshell, they provided no evidence where Bank of America owed them money. Judge Romero also found Bank of America could not be a debtor under either a Chapter 7 or Chapter 11 of the Bankruptcy Code. Finally, he postponed his decision on whether or not the petitioners acted in good faith because there was already reasons to dismiss the bankruptcy, and the issue most likely would be decided later if Bank of America opted to file a motion for damages.
It will be interesting to learn the effect Judge Romeros ruling will have on the 25 individuals. According to court documents, Bank of America researched the group and found they had business relations with only some of them, either currently or in the past. Some had owned homes which had been foreclosed by Bank of America while others were debtors whom filed bankruptcies listing Bank of America as creditors.
The good news is most all bankruptcies are filed voluntarily. Certain actions taken by a creditor, like a foreclosure, can force you into voluntarily filing, but if a creditor has a legitimate reason to file an involuntary bankruptcy against you, they will normally do so to protect the assets you currently own. Historically, when creditors file an involuntary bankruptcy, debtors will normally respond by voluntarily filing their own.
From the court docket illustrated above, you should be able to see that bankruptcy laws can be complicated. Common sense dictates that if you are considering filing bankruptcy, you might need a bankruptcy lawyer in order to help you understand how complex bankruptcy laws may apply in your particular situation. The 25 individuals in the illustration filed Pro Se, without a lawyer.
If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of New Haven or Meriden, Connecticut, contact us here today at . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
Similar Posts:
- Judgement Creditor Serves Writ Of Garnishment Upon Chapter 13 Trustee And Gets Debtor’s Money
- Court Disallows Mortgage Lender’s Standard Bankruptcy Fee In Its Secured Claim
- You Can’t Hide from Bankruptcy
- Unemployed Debtors And Chapter 7 Means Test
- Can I file Chapter 13 Bankruptcy in California
