Can creditors force your business to file chapter 11? 12 Answers as of January 18, 2013

I own a small business, and my creditors are trying to force me to file chapter 11 bankruptcy. I think my business will pick up soon because of the holidays, and I will be able to make progress on my payments if I just have a little more time. Can they force me to file chapter 11?

Ask a Local Attorney. 100% Anonymous. Free Answers.

Free Case Evaluation by a Local Lawyer: Click here
Mankus & Marchan, LTD
Mankus & Marchan, LTD | Tony Mankus
Sec. 303 of the Bankruptcy Code allows creditors to force a commercial business into Chapter 7 or a Chapter 11 bankruptcy, although there are some specific requirements and limitations.
Answer Applies to: Illinois
Replied: 12/9/2010
Henry, DeGraaff & McCormick, P.S. | Jacob DeGraaff
Yes, your creditors can force you into an involuntary bankruptcy filing - either Chapter 7 or Chapter 11. Several of your creditors with relatively large claims must act together to start this process.
Answer Applies to: Washington
Replied: 1/18/2013
Steven D. Keist, Attorney at Law
Steven D. Keist, Attorney at Law | Steven D. Keist
Yes they can.
Answer Applies to: Arizona
Replied: 12/9/2010
Law Office of L. Paul Zahn
Law Office of L. Paul Zahn | Paul Zahn
Yes, it is possible for creditors to force a filing. That is referred to as an involuntary bankruptcy petition. Oftentimes, however, the debtor will file the petition themselves (a voluntary petition). Chapter 11 allows a business to reorganize and work out a payment plan, so that may be the right path for you if you cannot work out a payment plan with them at this time.
Answer Applies to: California
Replied: 12/9/2010
DiManna Law Office, LLC.
DiManna Law Office, LLC. | Dawn DiManna
Yes, but there are specific requirements that must be met. Chapter 11 is complicated and you should consult with an attorney for your options.
Answer Applies to: New Hampshire
Replied: 12/9/2010
    Ursula G. Barrios Law
    Ursula G. Barrios Law | Guillermo Machado
    No one can force you to do anything, minus a court order. But if you cannot payy our creditors, they can seek and obtain judgments against you, said judgments subject to execution through bank levies, till taps, garnishments, liens and the like. Meaning,your creditors can eventually force your hand - either through legal collection or through elimination or restructuring of your debts under bankruptcy law.

    As for Chapter 11, this is only if Chapter 13 or Chapter 7 is not available to you first.
    Answer Applies to: California
    Replied: 12/9/2010
    Diefer Law Group, P.C.
    Diefer Law Group, P.C. | Abel Fernandez
    Creditors can commence an involuntary petition to force a bankruptcy.
    Answer Applies to: California
    Replied: 12/9/2010
    William C. Gosnell, Attorney at Law
    William C. Gosnell, Attorney at Law | William C. Gosnell
    They can force you into an involuntary Chapter 7 proceeding.

    I have never heard of an involuntary Chapter 11.
    Answer Applies to: Tennessee
    Replied: 12/9/2010
    The Law Office of Mark J. Markus
    The Law Office of Mark J. Markus | Mark Markus
    Yes, if enough creditors get together (either in dollar amount or number) they can file an "involuntary" bankruptcy case against you. Doing so is very risky for them, but it can be done.
    Answer Applies to: California
    Replied: 12/8/2010
    Law Offices of Michael J. Berger
    Law Offices of Michael J. Berger | Michael J. Berger
    It is possible for creditors to force a business to file Chapter 11. The statute that explains how involuntary bankruptcy cases work is 11 U.S.C. Section 303 involuntary cases. Here is a copy of the statute, current as of December, 2010.

    303. Involuntary cases

    (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 $ 14,425 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 $ 14,425 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
    Answer Applies to: California
    Replied: 12/8/2010
    Royzman Law Firm
    Royzman Law Firm | Natella Royzman
    Creditors can initiate involuntary bankruptcy cases. If you think that they are serious, you should speak to a bankruptcy attorney about filing a voluntary Chapter 11 right away.
    Answer Applies to: California
    Replied: 12/8/2010
    Janet A. Lawson Bankruptcy Attorney
    Janet A. Lawson Bankruptcy Attorney | Janet Lawson
    Yes, they form a committee and they can do it. you need to see someone who does a lot of chapter 11 work. it will not be cheap. Be prepared.
    Answer Applies to: California
    Replied: 12/8/2010
Click to View More Answers:
12 3 Free Legal QuestionsConnect with a local attorney