By Michael Temin:

 

Section 11 of Official Bankruptcy Form 105, Involuntary Petition Against an Individual, provides:

Allegation

Each petitioner is eligible to file this petition under 11 U.S.C. § 303(b).

The debtor may be the subject to an involuntary case under 11 U.S.C. § 303(a).

At least one box must be checked:

[  ] The debtor is generally not paying such debtor’s debts as they become due, unless they are the subject of a bona fide dispute as to liability or amount.

[  ] Within 120 days before the filing of this petition, a custodian, other than a trustee, receiver, or agent appointed or authorized to take charge of less than substantially all of the property of the debtor for the purpose of enforcing a lien against such property, was appointed or took possession.

Two recent cases have held that an involuntary petition which used Official Bankruptcy Form 105 was legally sufficient to state a claim and, thereby, defeat a  motion to dismiss. In re Hammond, 2021 Bankr. LEXIS 2651 (Bankr. S.D. Tex. Sept. 28, 2021); In re Gutierrez, 2020 Bankr. LEXIS 1304 (Bankr. S.D. Miss. May 15, 2020).

The Petitioning Creditor in Hammond used Official Form 105 by checking the applicable boxes to read as follows:

[X] Each Petitioner is eligible to file this petition under 11 USC § 303(b).

[X] The debtor may be the subject of an involuntary case under 11 USC § 303(a).

[X] The debtor is generally not paying such debtor’s debts as they become due, unless they are subject of a bona fide dispute as to liability or amount.

On the third page of the involuntary petition, where it is asked to list information about all of the petitioning creditors, the petitioning creditor listed only itself and inserted “Matured loans remain unpaid” under the heading of “Nature of petitioner’s claim” and listed $1,690,359 under the heading “Amount of value of any lien.”

The alleged debtor filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenging the sufficiency of the allegations of the involuntary petition.  To defeat a motion to dismiss, Petitioning Creditor must meet Federal Rule of Civil Procedure 8(a)(2)’s requirements of “a short and plain statement showing that the pleader is entitled to relief.”  The United States Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) stated:

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for them is conduct alleged.

Both Hammond and Gutierrez courts relied on Federal Rule of Bankruptcy Procedure 9009(a), which requires parties to use, without alteration, the Official Forms prescribed by the Judicial Conference of the United States in filing a bankruptcy petition.  The Rule states:

The Official Forms prescribed by the Judicial Conference of the United Sates shall be used without alteration, except as otherwise provided in these rules, in a particular Official Form, or in the national instructions for a particular Official Form.  Official Forms may be modified to permit minor changes not affecting wording or order of presenting information, including changes that:

  1. expand the prescribed areas for responses in order to permit complete responses;
  2. delete space not needed for responses; or
  3. delete items requiring detail in a question or category if the filer indicates—either by checking “no” or “none” or by stating in words—that there is nothing to report on that question or category. (emphasis added)

Each court denied the motion to dismiss and concluded that the better approach for issues such as  those raised by the motion to dismiss was a prompt trial.