Five Necessary Elements

• There are five necessary elements to an involuntary bankruptcy petition. The petition must have (1) the minimum number of creditors, (2) owed the threshold amount of money, (3) anyone who is an insider or employee or any recipient of preferences can not be included toward meeting either of those thresholds. Also, the debts themselves must (4) not be dependent on any contingency and (5) must be in good faith.
  
  

Thresholds

• When a debtor has 12 or more creditors, at least three of those creditors must join the petition for involuntary bankruptcy. In the case of fewer than 12 creditors, only one of those need petition.
  
  Whatever the number of creditors, the total unsecured debt must be at least $10,000.
  
  

Not Contingent Debts

• A "contingent debt" is one that involves a future "triggering event." For example, a co-signer on a loan has a contingent debt that becomes a fixed debt only when the triggering event---the default of the primary signer of that loan---defaults. Neither contingent debtors nor the monetary amount of their debt is counted in determining whether a petition for involuntary bankruptcy satisfies the threshold conditions.
  
  

Good Faith

• A petition must make the good faith allegation that the debtor is generally not paying its bona fide debts as they fall due. One or two missed payments will not suffice for this purpose. The petitioners must contend---and they will bear the burden of proof if the point is contested---that missed payments have become a regular event in relation to the overall finances of the debtor. According to credit adviser ABC-Amega Inc., if the bankruptcy court finds that the petition "was filed to favor specific creditors, or for reasons of malice or harassment, or as a substitute for state-law remedies," it will dismiss for failure of the good faith requirement.