Previous Blog posts have discussed fears that once the Bankruptcy Reform Act is in effect on October 17, 2005, more and more creditors will try to force people into involuntary bankruptcy in order to strip debtors of exemptions otherwise available under Florida law. For example, many debtors with expensive homes who enjoyed unlimited homestead protection in state court would forfeit homestead protection above $125,000 if they were forced into bankruptcy court by a creditor who filed in an involuntary petition. One creditor with an undisputed and liquidated claim for $12,000 can file a petition for involuntary bankruptcy. However, upon further review, fears of involuntary bankruptcy epidemic under the new bankruptcy law may be exaggerated, and in fact, the new law may make it even more difficult for creditors to impose bankruptcy upon individuals.
Section 109 of the Bankruptcy Code describes who may be a debtor. The new subsection 109(h)(1) states that an individual may be a debtor only if the individual first complete a “briefing” from a nonprofit budget and credit counseling agency. There is no provision of the new law which gives a creditor, a trustee, or a court the right to compel an individual to get a credit briefing. It seems logical that an individual who has not had his credit briefing can not voluntarily or involuntarily be a debtor under the Bankruptcy Code. This credit briefing requirement may make involuntary petitions against individuals moot, and a creditor who files an involuntary petition against a debtor who has not submitted to a credit briefing would seem to be in “bad faith” and would subject the creditor to sanctions.