Involuntary Bankruptcy Under New Bankruptcy Law
Many people who have recently moved to Florida and purchased homestead properties to protect their wealth against creditors in other states are concerned that after the effective date of the new bankruptcy law creditors may force them into involuntary bankruptcy. An involuntary bankruptcy would stip away homestead protection from anyone who has moved to Florida and purchased their homestead within the prior 40 months.
At a recent national conference of bankruptcy attorneys I asked the director of the lawyer's organization about increased risks of involuntary bankruptcy under the new bankruptcy law. Under his interpretation of the new law, the only people who could be debtors are those individuals who prior to attended a debt management course from an approved provider. Debtors who want to avoid bankruptcy would not take the approved course and they would thereby disqualify themselves from either voluntary or involuntary bankruptcy.
This past week the government issued proposed changes in the official bankruptcy rules to adapt to the new bankruptcy law. The proposed rules state that following an order approving a petition for involuntary bankruptcy the involuntary debtor had to file within 15 days a certificate of attendance at a debt management course. The rules contemplate that a person can be ordered by the bankruptcy court to get debt management education after, not before, he is adjudicated bankruptcy as a result of an involuntary petition. Whereas a voluntary bankruptcy debtor who does not file a certificate of attendance is subject to dismissal of his case, the rules do not specify penalties for failure to attend debt management as a result of an involuntary petition.
We do not know if courts will find that the debt management education requirement of the new law is an obstacle to involuntary petitions. It appears that proposed bankruptcy rules assume that mandatory debt management education is not inconsistent with involuntary bankruptcy.
posted by Jonathan Alper, asset protection and bankruptcy lawyer, Orlando, Florida
