There are two forms of bankruptcies- voluntary and involuntary. Although rare, an involuntary bankruptcy occurs when a creditor legally forces a debtor into bankruptcy. A creditor can petition a U.S. Bankruptcy Court to place a debtor into bankruptcy but certain criteria has to be met or the case will be dismissed by the court.
Recently 25 individuals petitioned the District of Colorado bankruptcy court to place Bank of America into involuntary bankruptcy. The petitioners claimed the bank owed them more than $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 June 21, 2011. Judge Romero also ruled that 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 does this ruling means to the 25 filing individuals who filed the petition Pro Se? Bank of America was not forced into bankruptcy, and they may now be responsible for Bank of America’s legal fees and damages.
Bank of America raised four questions in its defense: 1) Whether or not the Court had jurisdiction to hear the case; 2) Whether or not the petitioning creditors were eligible to file an involuntary petition; 3) 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 4) 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 lack of documentation. He ruled they provided no evidence that Bank of America owed them money.
Judge Romero also found Bank of America could not be a debtor under either Chapter 7 or Chapter 11 of the Bankruptcy Code. Finally, he postponed his decision on whether or not the petitioners acted in good faith, an issue which can be decided later if Bank of America files a motion for damages.
It will be interesting to learn the effect Judge Romero’s 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.
Certain actions taken by a creditor, like a foreclosure, can force you into a voluntarily bankruptcy 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 respond by voluntarily filing their own bankruptcy.
If you need relief from the stress of debt and you live in or around the metropolitan areas of New Haven or Meriden, Connecticut, contact us at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.