Involuntary Bankruptcy Petitions
Three creditors with undisputed, liquidated claims in excess of about $15,000 can file a petition to force a debtor into bankruptcy. This process is not particularly expensive and allows the creditors to force the debtor into a “collective proceeding” for the benefit of all creditors instead of fighting each other over limited resources. The trustee also has important powers and rights allowing for recovery in many instances where normal creditors rights would not be effective. Creditors must exercise care in filing an involuntary bankruptcy case. If the relief is denied, they may be required to pay substantial damages and attorneys’ fees
Case Study – Civil Engineering Firm
Recently, three creditors filed an involuntary bankruptcy petition against a Chicago civil engineering firm. After much court controversy, the bankruptcy court determined that the civil engineering firm was not paying its debts generally in accordance with their terms. The court ordered the firm into chapter 7 bankruptcy.
David Leibowitz was appointed chapter 7 trustee for this debtor. He hired the attorneys for the petitioning creditors to serve as special counsel. To date, he has recovered close to $100,000. Moreover, he has identified causes of action that he anticipates will result in substantial recoveries for the benefit of creditors. As this case unfolds, we will report further results.
Case Study – Ponzi Scheme
Creditors filed an involuntary bankruptcy case against Kevin Carney, alleging that he had swindled them out of millions of dollars. The bankruptcy court declared Carney bankrupt. David Leibowitz was appointed chapter 7 trustee. He hired special counsel to assist him in this matter along with Lakelaw. To date, he has recovered over $1 million. He is presently negotiating with the Internal Revenue Service seeking to avoid its claim so that a meaningful distribution can be made to the victims of this Ponzi scheme. This case and Mr. Leibowitz’ work on this case has been featured on the national television program American Greed.
Case Study – Defending Against an Involuntary Petition
An aggrieved ex-spouse and her mother sued our client seeking to force him into involuntary bankruptcy case. The ex-spouse claimed to be representing her children in order to establish the necessary three creditors. David Leibowitz defended the ex-husband in bankruptcy court. He proved that the claims of the ex-spouse and her children were one and the same. Thus there were not three creditors. The bankruptcy court threw out the involuntary bankruptcy petition and sent this case back to the divorce court where it belonged.