Under the Bankruptcy Code, a voluntary or involuntary case is commenced by filing a petition with the bankruptcy court. A Chapter 7 or 11 bankruptcy case may be initiated by a voluntary filing by the debtor or by an involuntary filing by the debtor’s creditors. Cases under all other chapters may be initiated only by a voluntary petition.
The voluntary petition may request relief under Chapter 7, 9, 11 or 13. A petitioner commences a voluntary case under the Bankruptcy Code by filing a petition with the bankruptcy court. The commencement of a voluntary case constitutes an order for relief. The proper location for the filing of the bankruptcy is generally determined by where a business debtor has its principal place of business or principal assets or where an individual lives. If a bankruptcy clerk has been appointed for the district, the petition should be filed with the bankruptcy clerk. If a district does not have a bankruptcy clerk, then the debtor should file the petition with the clerk of the district court. The debtor is required to file schedules of assets and liabilities, current income and expenditures, statement of financial affairs, a schedule of executory contracts, and others, upon the filing of a voluntary petition.
A joint case is commenced by the filing with the bankruptcy court of a single petition under a chapter by an individual that may be a debtor under that particular chapter and such individual’s spouse. The commencement of a joint case constitutes an order for relief. After the commencement of a joint case, the court determines the extent, if any, to which the debtors’ estates are to be consolidated.
An involuntary case may be commenced by one or more creditors holding claims against a debtor, under certain circumstances, by filing an involuntary petition and a summons with the clerk of the bankruptcy court. The debtor has 20 days to file objections. If that happens, the case can go to trial to determine if the filing was appropriate. If the debtor does not object, the bankruptcy proceeds in the same fashion as a voluntary case. An involuntary case can be initiated only under Chapter 7 or Chapter 11 of the Bankruptcy Code.
The debtor may resist the involuntary petition by filing an opposition and demonstrating that it is generally paying its debts as they become due. In a case where the court dismisses an involuntary petition, it may grant a judgment against the petitioning creditors for the costs and attorneys’ fees incurred by the debtor as well as compensatory damages caused by the filing. The court may also assess punitive damages if an involuntary bankruptcy was brought in bad faith.
Cases Ancillary to Foreign Proceedings
A case ancillary to a foreign proceeding is commenced by the filing of a petition with the bankruptcy court by a foreign representative. If a party in interest does not timely controvert the petition, or after trial, the court may enjoin the commencement or continuation of any action against a debtor with respect to property involved in such foreign proceeding.
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