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The Bankruptcy Hotline

BY ALM Staff
August 15, 2003

'Bona Fide Dispute' Should Be Determined ASAP in Involuntary Filing

The Second Circuit has held that a bankruptcy court's determination that a debt is the subject of a 'bona fide dispute' under the Bankruptcy Code should be made as soon as possible in an involuntary proceeding. Key Mechanical Inc. v. BDC, 56 LLC, 02-5029 (May 21).

Section 303(b), states that an involuntary case against a debtor is commenced when three or more entities have a claim 'that is not contingent as to liability or the subject of a bone fide dispute.' The timing for this determination, however, has divided courts, with some judges finding the question should be decided immediately, and others allowing the question to be resolved later in the proceedings.

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