Source: https://uscode.house.gov/view.xhtml?req=(title:11%20section:303%20edition:prelim)%20OR%20(granuleid:USC-prelim-title11-section303)&f=treesort&edition=prelim&num=0&jumpTo=true
Timestamp: 2020-08-13 06:57:09
Document Index: 227413142

Matched Legal Cases: ['§ 303', '§426', '§204', '§108', '§332', '§802', '§1234', '§2', '§1234', '§1234', '§802', '§254', '§283', '§204', '§283', '§204', '§426', '§426', '§426', '§427', '§1234']

[USC02] 11 USC 303: Involuntary cases
<< Previous TITLE 11 / CHAPTER 3 / SUBCHAPTER I / § 303 Next >>
11 USC 303: Involuntary cases Text contains those laws in effect on August 12, 2020
(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-
(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 $10,000 1 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, by one or more of such holders that hold in the aggregate at least $10,000 1 of such claims;
(3) if such person is a partnership-
(j) Only after notice to all creditors and a hearing may the court dismiss a petition filed under this section-
(k)(1) If-
( Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2559 ; Pub. L. 98–353, title III, §§426, 427, July 10, 1984, 98 Stat. 369 ; Pub. L. 99–554, title II, §§204, 254, 283(b), Oct. 27, 1986, 100 Stat. 3097 , 3105, 3116; Pub. L. 103–394, title I, §108(b), Oct. 22, 1994, 108 Stat. 4112 ; Pub. L. 109–8, title III, §332(b), title VIII, §802(d)(2), title XII, §1234(a), Apr. 20, 2005, 119 Stat. 103 , 146, 204; Pub. L. 111–327, §2(a)(9), Dec. 22, 2010, 124 Stat. 3558 .)
Section 303(b)(1) is modified to make clear that unsecured claims against the debtor must be determined by taking into account liens securing property held by third parties.
Section 303(h)(2) reflects a compromise pertaining to section 543 of title 11 relating to turnover of property by a custodian. It provides an alternative test to support an order for relief in an involuntary case. If a custodian, other than a trustee, receiver, or agent appointed or authorized to take charge of less than substantially all of the property of the debtor for the purpose of enforcing a lien against such property, was appointed or took possession within 120 days before the date of the filing of the petition, then the court may order relief in the involuntary case. The test under section 303(h)(2) differs from section 3a(5) of the Bankruptcy Act [section 21(a)(5) of former title 11], which requires an involuntary case to be commenced before the earlier of time such custodian was appointed or took possession. The test in section 303(h)(2) authorizes an order for relief to be entered in an involuntary case from the later date on which the custodian was appointed or took possession.
Subsection (h) provides the standard for an order for relief on an involuntary petition. If the petition is not timely controverted (the Rules of Bankruptcy Procedure will fix time limits), the court orders relief after a trial, only if the debtor is generally unable to pay its debts as they mature, or if the debtor has failed to pay a major portion of his debts as they become due, or if a custodian was appointed during the 90-day period preceding the filing of the petition. The first two tests are variations of the equity insolvency test. They represent the most significant departure from present law concerning the grounds for involuntary bankruptcy, which requires an act of bankruptcy. Proof of the commission of an act of bankruptcy has frequently required a showing that the debtor was insolvent on a "balance-sheet" test when the act was committed. This bill abolishes the concept of acts of bankruptcy.
The equity insolvency test has been in equity jurisprudence for hundreds of years, and though it is new in the bankruptcy context (except in chapter X [chapter 10 of former title 11]), the bankruptcy courts should have no difficulty in applying it. The third test, appointment of a custodian within ninety days before the petition, is provided for simplicity. It is not a partial re-enactment of acts of bankruptcy. If a custodian of all or substantially all of the property of the debtor has been appointed, this paragraph creates an irrebuttable presumption that the debtor is unable to pay its debts as they mature. Moreover, once a proceeding to liquidate assets has been commenced, the debtor's creditors have an absolute right to have the liquidation (or reorganization) proceed in the bankruptcy court and under the bankruptcy laws with all of the appropriate creditor and debtor protections that those laws provide. Ninety days gives creditors ample time in which to seek bankruptcy liquidation after the appointment of a custodian. If they wait beyond the ninety day period, they are not precluded from filing an involuntary petition. They are simply required to prove equity insolvency rather than the more easily provable custodian test.
Subsection (i) permits the court to award costs, reasonable attorney's fees, or damages if an involuntary petition is dismissed other than by consent of all petitioning creditors and the debtor. The damages that the court may award are those that may be caused by the taking of possession of the debtor's property under subsection (g) or section 1104 of the bankruptcy code. In addition, if a petitioning creditor filed the petition in bad faith, the court may award the debtor any damages proximately caused by the filing of the petition. These damages may include such items as loss of business during and after the pendency of the case, and so on. "Or" is not exclusive in this paragraph. The court may grant any or all of the damages provided for under the provision. Dismissal in the best interests of credits under section 305(a)(1) would not give rise to a damages claim.
2010-Subsecs. (k), (l). Pub. L. 111–327 redesignated subsec. (l) as (k).
2005-Subsec. (b)(1). Pub. L. 109–8, §1234(a)(1), inserted "as to liability or amount" after "bona fide dispute" and substituted "if such noncontingent, undisputed claims" for "if such claims".
Subsec. (h)(1). Pub. L. 109–8, §1234(a)(2), inserted "as to liability or amount" before semicolon.
Subsec. (k). Pub. L. 109–8, §802(d)(2), struck out subsec. (k) which read as follows: "Notwithstanding subsection (a) of this section, an involuntary case may be commenced against a foreign bank that is not engaged in such business in the United States only under chapter 7 of this title and only if a foreign proceeding concerning such bank is pending."
1994-Subsec. (b). Pub. L. 103–394 substituted "$10,000" for "$5,000" in pars. (1) and (2).
1986-Subsec. (a). Pub. L. 99–554, §254, inserted reference to family farmer.
Subsec. (b). Pub. L. 99–554, §283(b)(1), substituted "subject of" for "subject on".
Subsec. (g). Pub. L. 99–554, §204(1), substituted "may order the United States trustee to appoint" for "may appoint".
Subsec. (h)(1). Pub. L. 99–554, §283(b)(2), substituted "are the" for "that are the".
Subsec. (i)(1). Pub. L. 99–554, §204(2), inserted "or" at end of subpar. (A) and struck out subpar. (C) which read as follows: "any damages proximately caused by the taking of possession of the debtor's property by a trustee appointed under subsection (g) of this section or section 1104 of this title; or".
1984-Subsec. (b). Pub. L. 98–353, §426(a), inserted "against a person" after "involuntary case".
Subsec. (b)(1). Pub. L. 98–353, §426(b)(1), inserted "or the subject on a bona fide dispute,".
Subsec. (h)(1). Pub. L. 98–353, §426(b)(2), inserted "unless such debts that are the subject of a bona fide dispute".
Subsec. (j)(2). Pub. L. 98–353, §427, substituted "debtor" for "debtors".
Pub. L. 109–8, title XII, §1234(b), Apr. 20, 2005, 119 Stat. 204 , provided that: "This section [amending this section] and the amendments made by this section shall take effect on the date of the enactment of this Act [Apr. 20, 2005] and shall apply with respect to cases commenced under title 11 of the United States Code before, on, and after such date."
By notice dated Feb. 5, 2019, 84 F.R. 3488, effective Apr. 1, 2019, in subsec. (b)(1), (2), dollar amount "15,775" was adjusted to "16,750". See notice of the Judicial Conference of the United States set out as a note under section 104 of this title.
By notice dated Feb. 16, 2016, 81 F.R. 8748, effective Apr. 1, 2016, in subsec. (b)(1), (2), dollar amount "15,325" was adjusted to "15,775".
By notice dated Feb. 12, 2013, 78 F.R. 12089, effective Apr. 1, 2013, in subsec. (b)(1), (2), dollar amount "14,425" was adjusted to "15,325".
By notice dated Feb. 19, 2010, 75 F.R. 8747, effective Apr. 1, 2010, in subsec. (b)(1), (2), dollar amount "13,475" was adjusted to "14,425".
By notice dated Feb. 7, 2007, 72 F.R. 7082, effective Apr. 1, 2007, in subsec. (b)(1), (2), dollar amount "12,300" was adjusted to "13,475".
By notice dated Feb. 18, 2004, 69 F.R. 8482, effective Apr. 1, 2004, in subsec. (b)(1), (2), dollar amount "11,625" was adjusted to "12,300".
By notice dated Feb. 13, 2001, 66 F.R. 10910, effective Apr. 1, 2001, in subsec. (b)(1), (2), dollar amount "10,775" was adjusted to "11,625".
By notice dated Feb. 3, 1998, 63 F.R. 7179, effective Apr. 1, 1998, in subsec. (b)(1), (2), dollar amount "10,000" was adjusted to "10,775".