Involuntary Bankruptcy A New Concern For Asset Protection
The new bankruptcy law will create a wide disparity between asset protection in state court venues and protection in bankruptcy court. Exemptions will be fewer and harder to defend in bankruptcy. An example is Florida homestead which will continue to provide immediate protection against state court collections, but which will not be protected in bankruptcy court until 40 months after purchase or payment of mortgage principal. The increase of creditor rights in the bankruptcy setting will encourage creditors in some instances to consider filing petitions for involuntary bankruptcy. A Florida resident who was successfully protecting his wealth against creditor collections in a large homestead property could find his homestead protection stripped away if forced into bankruptcy. If a debtor has more than twelve unsecured creditors, any three creditors can join in a petition to have the debtor involuntarily declared bankruptcy. In the past, involuntary bankruptcy is uncommon because petitioning creditors can be held liable for damages and debtor's attorneys fees if their involuntary petition is denied for any reason. Involuntary bankruptcy will be a greater concern in asset protection planning after the new bankruptcy law goes into effect.
Mr. Alper,
I am greatful for all the information you post to your site.
I have a question. You said,
"If a debtor has more than twelve unsecured creditors, any three creditors can join in a petition to have the debtor involuntarily declared bankruptcy."
Does this mean that the debtor is exempt from involuntary bankruptcy if they have 11 or fewer unsecured creditors?