Involuntary Bankruptcy: What Florida Business Owners and Executives Need to Know

While businesses can use bankruptcy as a tool to avoid collection, alleviate financial strain, and restructure their debts for the future, creditors can use involuntary bankruptcy as a tool to protect their interests as well. If your business is facing an involuntary bankruptcy petition, there is a lot you need to know, and it will be important for you to consult with an experienced Miami bankruptcy litigation attorney who can help you make informed and strategic decisions with your business’s long-term best interests in mind.

5 Key Considerations for Businesses Facing an Involuntary Bankruptcy Proceeding in Florida

For Florida business owners, responding effectively to an involuntary bankruptcy proceeding requires careful consideration of several factors. Here are five key examples:

1. Is Your Business Facing an Involuntary Bankruptcy Proceeding Under Chapter 7 or Chapter 11?

Under Section 303(a) of the U.S. Bankruptcy Code, creditors can initiate an involuntary bankruptcy proceeding under either Chapter 7 or Chapter 11. Bankruptcy proceedings under Chapter 7 and Chapter 11 are very different, and, as a result, one of the first facts you need to discern is which type of bankruptcy case your business is facing.

Chapter 7 bankruptcy cases involve the liquidation of the debtor’s assets. Generally speaking, this means winding up the debtor’s affairs (and shutting down the business). Chapter 11 bankruptcy cases, in contrast, involve reorganizing the debtor’s liabilities. In Chapter 11 cases, the goal is to find a way for the debtor to reduce its monthly debt load so that it can continue operating as a going concern.

Unless you are prepared to shut down your business, if your business is facing an involuntary Chapter 7 bankruptcy proceeding, you will need to either fight the proceeding in its entirety or seek to have it converted to Chapter 11. Both of these are options under varying circumstances, and they are both options you will want to discuss with an experienced Miami bankruptcy litigation attorney promptly.

2. Did the Creditor that Filed the Involuntary Bankruptcy Petition Meet All Applicable Statutory Requirements?

When seeking to initiate an involuntary bankruptcy proceeding—whether under Chapter 7 or Chapter 11—creditors must meet all applicable statutory requirements. These requirements include (but are not limited to):

• Number of Creditors – If a business has fewer than 12 creditors, then any one of its creditors can initiate an involuntary bankruptcy proceeding. However, if a business has 12 or more creditors, then at least three creditors with non-contingent claims must come together to force a bankruptcy case under Chapter 7 or Chapter 11.
• Value of Qualifying Claims – Involuntary bankruptcy petitions are also subject to minimum requirements concerning the amount at issue. As of 2025, creditors seeking to force a Chapter 7 or Chapter 11 bankruptcy must stand to recover at least $21,050.
• Procedural Requirements – Just like debtors, creditors seeking relief through the federal bankruptcy process must meet all procedural requirements. If a creditor seeking to initiate an involuntary bankruptcy proceeding does not follow the stringent requirements for filing a bankruptcy petition in federal court, this alone can provide grounds for dismissal.

A creditor’s failure to meet any of the applicable statutory requirements for initiating an involuntary bankruptcy proceeding can potentially serve as a defense for the debtor involved. As we discuss below, however, business owners who are facing involuntary bankruptcy proceedings will want to think strategically about whether seeking dismissal is the best option—or whether they may want to take advantage of the opportunity to leverage the benefits of the bankruptcy process.

3. Is Your Business “Generally Not Paying [Its] Debts as Such Debts Become Due”?

Under Section 303(h)(1) of the U.S. Bankruptcy Code, a bankruptcy judge may only grant an involuntary petition against a debtor if “the debtor is generally not paying such debtor’s debts as such debts become due.” What it means to “generally not pay[]” a business’s debts isn’t clearly defined, and this can also provide a defense to an involuntary Chapter 7 or Chapter 11 proceeding in some cases. If a creditor jumps the gun and initiates an involuntary bankruptcy proceeding too soon, the business targeted in the proceeding should not be forced to go through the bankruptcy process.

4. Are Any of the Debts at Issue the Subject of a Bona Fide Dispute?

Creditors are also prohibited from pursuing involuntary bankruptcy proceedings in cases involving debts that are the subject of a “bona fide dispute.” The same generally applies to pursuing collection efforts as well. While there are ways that creditors can seek to enforce disputed debts, initiating an involuntary bankruptcy proceeding is not one of them. In this scenario, seeking a resolution will generally involve entering into business negotiations, pursuing non-bankruptcy litigation or initiating an alternative dispute resolution (ADR) proceeding.

5. Is It In Your Business’ Best Interests to Seek Dismissal or to Seek a Favorable Resolution Through the Bankruptcy Process?

Business owners who are facing involuntary bankruptcy proceedings need to make strategic decisions about how best to handle the situation at hand. In some cases, seeking dismissal of the proceeding will be the best approach. In others, however, going through the bankruptcy process may be the best (and perhaps only) viable option. When creditors have grounds to pursue collection, going through a business bankruptcy—particularly under Chapter 11—can provide essential protections while also facilitating a favorable long-term resolution.

Importantly, regardless of which option you choose, strict deadlines apply. If your business fails to timely respond to a pending involuntary bankruptcy proceeding, this can lead to unintended and undesirable consequences. Once again, to ensure that you are making informed decisions with your business’s long-term best interests in mind, you should consult with an experienced Miami bankruptcy litigation attorney as soon as possible.

Schedule a Free Consultation with an Experienced Miami Bankruptcy Litigation Attorney at Edelboim Lieberman

Is your company facing an involuntary bankruptcy proceeding in Florida? If so, we invite you to contact us for more information. To speak with an experienced Miami bankruptcy litigation attorney at Edelboim Lieberman in confidence, please call 305-768-9909 or request a free consultation online today.