Trade and other unsecured creditors concerned about a debtor’s nonpayment of their claims may consider joining in the filing of an involuntary bankruptcy petition against that debtor. A petitioning creditor whose claim is not subject to a “bona fide dispute as to liability or amount” has standing to file an involuntary bankruptcy petition pursuant to Section 303(b) of the Bankruptcy Code.
Conflicting interpretations of the “bona fide dispute” limitation on a petitioning creditor’s standing to join an involuntary petition have been the subject of much litigation, as the courts have recently been grappling with how the “bona fide dispute” limitation applies to creditors holding partially disputed claims. A growing number of courts have held that a petitioning creditor’s partially disputed claim is subject to a “bona fide dispute as to liability or amount, ” which disqualifies the creditor from joining an involuntary petition. Other courts have held that the undisputed portion of a creditor’s partially disputed claim is not subject to a “bona fide dispute” and that, therefore, a creditor holding a partially disputed claim is not barred from being a petitioning creditor.Click here to view the full article