[Anonymous]

Green owes unsecured creditors: Rice, $5,000; Vick, $3,000; Young, $7,000; and Zinc, $2,750. Green has not paid any creditor since January 1, 20X1. On March 15, 20X1, Green’s sole asset, a cabin cruiser, was seized by Xeno Marine Co., the holder of a perfected security interest in the boat. On July 1, 20X1, Rice, Vick, and Young petitioned Green into involuntary bankruptcy under Chapter 7 of the Federal Bankruptcy Code. If Green opposes the involuntary petition, the petition will be:

A. upheld, because the 3 filing creditors are owed more than $15,325.

B. upheld, because 1 creditor is owed more than $12,300.

C. dismissed, because there are less than 12 creditors.

D. dismissed, because the boat was seized more than 90 days before the filing.

A. If Green opposes the involuntary petition, the petition will be upheld because the three filing creditors are owed more than $15,325 of unsecured debt. The key term is “involuntary bankruptcy.” An involuntary bankruptcy petition may be filed by any three or more creditors whose aggregate claims total at least $15,325 if there are more than 12 creditors. If there are fewer than 12 creditors, then any one or more of them may file when their aggregate claims total at least $15,325.

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Rice, Vick, and Young petitioned, so that’s 5000+3000+7000=15,000, which is less than 15,325. Am I missing something here?

[Anonymous]

You forgot about Zinc. It takes 3 creditors to petition for involuntary bankruptcy if there are more than 12 and the debt to those three has to be $15,325. But there are fewer than 12 in this problem, so any one of them can petition as long as the total debt is $15,325.

If I'm wrong, somebody correct me.

[Anonymous]

No, I think this is an error. The claims of the petitioners must be over the 15325. I am guessing that the logic of the question wasn't updated when the amount changed from $14K-something (even though the amounts within the answer choices were updated.)

[Anonymous]

@Kricket

True that the total amounts owed by creditors exceed 15,325. But it said that only Rice, Vick, and Young petitioned for bankruptcy.

[Author]

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