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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37864
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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Please review first what you wrote on involuntary bankruptcy.

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Please review first what you wrote on involuntary bankruptcy. There is a clause in the bankruptcy law called "unfair advantage." I have many creditor accounts in good standing. An involuntary bankruptcy can harm these other creditors by action by just one. Can you provide more detail or "unfair advantage" or what a petitioner needs to fulfill an involuntary bankruptcy.


In IN RE WESTERLEIGH DEVELOPMENT CORP., 141 B.R. 38 (USBC SD NY 6/4/1992), the U.S. Bankruptcy Court for the Southern District of New York writes: "A creditor is not authorized to contest an involuntary petition because a creditor may have an incentive to protect a preference or to gain some unfair advantage of the expense of other creditors. In re New Era Co.,115 B.R. 41 (Bankr. S.D.N.Y.1990) (citing supporting cases), aff'd,125 B.R. 725 (S.D.N.Y.1991)."


There is actually very little case law concerning the "unfair advantage" principle. Most of the case law refers to very narrow and unique circumstances -- and the above quote from the NY bankruptcy court is about the most general rule available. From the rule, one can synthesize a debtor's response, which probably would be well served if it were combined with a response by other creditors, to request a dismissal of the involuntary bankruptcy: that the debtor who filed the involuntary petition is attempting to obtain a preference for its debts owed by the debtor, and in fact, the issue is really simply a dispute between the creditor and debtor -- because the debtor is not insolvent, and so only the petitioning creditor's debts are at risk -- not all of the other creditors' debts.


Please let me know if I can be of further assistance.



Customer: replied 3 years ago.

You write: that the *debtor* who filed the involuntary petition is attempting to gain a preference for its debts owed by the debtor



What I asterisk should that be CREDITOR? I think so. I knew a lawyer who addressed a woman Mr. and misspelled a nursing home as a snow skiing resort.

Please advise if there is a typo Otherwise a good analysis.



Whoops. You are correct. The phrase should begin, "that the creditor who filed the involuntary petition...."

Sorry about that, chief!

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