ABC Assignee Banned
from Filing a Voluntary
Bankruptcy Petition
By Robert C. Meyer
http://robertcmeyer.com/
T
he Eleventh Circuit Court of
Appeals recently ruled that
assignees involved with an
assignment for the benefit of the
creditors, as defined under Florida
statute, do not have the right to
voluntarily file a bankruptcy petition
for the assigned corporation.1
This concept initially appears to
be a newly created prohibition but
merely incorporates old precedent.
Below, this article will commence with
some background information about
restrictions on bankruptcy filing, and
how this ruling does not create new
limitations; but incorporates limitations
created 70 years ago by the United
States Supreme Court.
Historical Perspective
Chapter May be Filed
on
What
The three primary chapters
offered in bankruptcy involve liquidation
(Chapter 7) or reorganization (Chapters
11 and 13). Statutory clauses to the
Bankruptcy Code limit the ability or
filing chapter 13. First, a Chapter 13
14
CONSUMER BANKRUPTCY JOURNAL
debtor cannot be an entity.2 And,
the individual who seeks Chapter 13
protection, cannot have debts exceeding
certain limits.3 Alternatively, Chapter
11 will accept most any individual and
has only a few limits for entities.4 In
fact, most entities are permitted to file
under Chapter 11 even though some
are prohibited5 to file under Chapter
7.6
Individuals who merely resided
in the United States (citizenship is not
required) may file for Chapter 7 relief.
Pre-BACPA7, several federal rulings
held that there is no good faith filing
requirement in a Chapter 7 bankruptcy
proceeding.8 Post-BACPA, or after
2005, amendments to the Bankruptcy
Code introduced additional bad faith
clauses into section 707(b). PostBACPA, the majority of courts held that
bad faith constitutes cause for dismissal
under section 707(a).
A slew of
published rulings have since prohibited
individuals from filing Chapter 7
petitions.9 Not surprisingly, there
were fact-driven exceptions to the new
rule.0
Spring 2016
Who May Sign
A related issue addresses
who may sign the papers for the
voluntary filing. That issue – which
is not addressed by the Bankruptcy
Code – became a jurisprudentially
created limitation.
For individuals,
the cases are relatively limited to
forgery. For corporations or other
entities, the issues largely focus upon
authorization. The corporate cases
demand corporate review under the
applicable state statutes and apply
such state law for purposes of authority
to file. In 1945, the United States
Supreme Court reviewed this issue and
ruled, “If the District Court finds that
those who purport to act on behalf of
the corporation have not been granted
authority by local law to institute the
proceedings, it has no alternative but
to dismiss the petition. It is not enough
that those who seek to speak for the
corporation may have the right to
obtain that authority.”1 In short, state
law governs the authorization of a party
to file federal bankruptcy.2
National Association of Consumer Bankruptcy Attorneys