Question

Joseph owes $15,000 to Carmel Enterprises, $8,500 to Vulcan Co., $11,000 to David and $11,500 to Sigma Enterprises. He has not been making payments on these debts for the past 20 months. Which of these creditors can force Joseph into involuntary bankruptcy?

a. Carmel Enterprises only
b. Carmel Enterprises and David only
c. Carmel Enterprises, Sigma Enterprises, David, and Vulcan Co.
d. Sigma Enterprises, David and Vulcan Co. only

Answer 1

At least three creditors need to come together to force Joseph into involuntary bankruptcy since he owes money to four creditors, making option 'c' the correct choice.

Step-by-step explanation:

The question pertains to the conditions under which creditors can initiate an involuntary bankruptcy petition against a debtor. Involuntary bankruptcy is a situation where creditors can force a debtor into bankruptcy proceedings under certain conditions. According to U.S. bankruptcy law, generally, if the debtor has fewer than 12 creditors, one creditor can initiate involuntary bankruptcy if the debt owed is a minimum threshold and the debtor has not been paying its debts as they come due. If the debtor has 12 or more creditors, an involuntary bankruptcy requires three or more creditors with combined unsecured claims of at least the statutory minimum, and the debtor must generally not be paying its debts as they come due.

In Joseph's case, he owes money to four creditors. This means for initiating an involuntary bankruptcy, at least three of these creditors with claims totaling more than the statutory threshold would need to come together to file the petition. Therefore, the answer is Carmel Enterprises, Sigma Enterprises, David, and Vulcan Co. can potentially force Joseph into involuntary bankruptcy, making option 'c' the correct choice.