Issue link: https://mbozikis.ufcontent.com/i/1422521
48 2. Involuntary Filing An involuntary bankruptcy case may be commenced only under Chapter 7 or 11 and only against a person that is eligible to be a debtor under the selected Chapter, unless the person is a farmer or a corporation that is not a business or commercial corporation. If a debtor has twelve or more creditors, an involuntary case is commenced by the filing of a petition by three or more entities holding noncontingent, undisputed claims against the debtor, provided that such claims aggregate $16,750 more than the value of any lien or property of the debtor that secures such claims. In the event that a debtor has fewer than twelve creditors (excluding employees or insiders of the debtor or transferees of avoidable transfers), however, the involuntary petition may be brought by one or more entities holding noncontingent, undisputed claims against the debtor provided that such claims aggregate $16,750 above the value of the collateral. 11 U.S.C. § 303(b). The filing of an involuntary petition also triggers the automatic stay (discussed below in Chapter V.C.). 11 U.S.C. § 362(a). If the involuntary petition is not timely challenged, the bankruptcy court orders relief under the appropriate Chapter. If the debtor files an answer, a trial is held, and relief is ordered against a debtor in an involuntary proceeding only if (i) the debtor is generally not paying its debts as such debts become due (and such debts are not the subject of a bona fide dispute as to liability or amount) or (ii) within 120 days before the filing of the petition, a custodian, other than a trustee, receiver or agent authorized to take control of less than substantially all of the debtor's property for the purpose of enforcing a lien against such property, was appointed or took possession. 11 U.S.C. § 303(h). To determine if a debtor is "generally not paying" its debts, courts apply a "totality of circumstances" test that considers a number of factors, including (i) the number of unpaid claims, (ii) the amounts of the unpaid claims, (iii) the materiality of the non-payments, and (iv) the debtor's overall financial condition. See In re Amanat, 321 B.R. 30, 39–40 (Bankr. S.D.N.Y. 2005).