United States: Numerosity Requirement For Filing Involuntary Bankruptcy Petition

Section 303 of the Bankruptcy Code provides creditors with a mechanism to force a recalcitrant debtor into bankruptcy through the filing of an involuntary petition for relief. Pursuant to this section, an involuntary bankruptcy case may be commenced only under Chapter 7 or 11 of the Bankruptcy Code, and may only be brought against a person otherwise qualified to file a voluntary petition. Where the purported debtor has fewer than 12 creditors, the involuntary petition need only be filed by a single creditor. However, where the purported debtor has 12 or more creditors, the involuntary petition must be filed by at least three creditors.

In certain situations, more than one creditor may attempt to file an involuntary petition on account of a single obligation. For example, several parties may hold a shared judgment against a single debtor, or may be joint benefN.Y. May 1, 2015), the U.S. Bankruptcy Court for the Eastern District of New York determined that four judgment creditors holding a single default judgment based upon an apparent oral contract constituted four separate creditors for purposes of Section 303(b)(1). In that case, an involuntary Chapter 7 petition was filed against debtor John Zapas by five of his creditors. Of the five petitioning creditors, four were individuals each holding a claim pursuant to a single pre-petition state court judgment against Zapas in the amount of $656,683 (the judgment creditors). The fifth held a separate pre-petition state court judgment against Zapas in the amount of $460,374.

In In re Zapas, 2015 Bankr. LEXIS 1487 (Bankr. E.D.N.Y. May 1, 2015), the U.S. Bankruptcy Court for the Eastern District of New York determined that four judgment creditors holding a single default judgment based upon an apparent oral contract constituted four separate creditors for purposes of Section 303(b)(1). In that case, an involuntary Chapter 7 petition was filed against debtor John Zapas by five of his creditors. Of the five petitioning creditors, four were individuals each holding a claim pursuant to a single pre-petition state court judgment against Zapas in the amount of $656,683 (the judgment creditors). The fifth held a separate pre-petition state court judgment against Zapas in the amount of $460,374.

Zapas sought to dismiss the involuntary petition on the ground that the petitioning creditors failed to satisfy the numerosity requirement. Zapas asserted that he had more than 12 creditors, and thus at least three separate creditors were required to file the involuntary petition against him. Zapas argued that because the judgment creditors really held only one claim among the four of them, the judgment creditors should only be counted as one petitioning creditor for purposes of Section 303(b)(1).

In order to determine whether the judgment creditors constituted one creditor or four, the court began with an examination of the plain language of Section 303 of the Bankruptcy Code: In order to qualify as a petitioning creditor under Section 303(b), a petitioning creditor must be an "entity" and must be the "holder of a claim." Bankruptcy Code Section 101(15) defines "entity" as, among other things, "a person, estate, trust or governmental unit." For purposes of this definition, a "person" includes an individual, partnership and corporation. Accordingly, because each of the judgment creditors was an individual, the court held that they each qualified as an "entity" within the meaning of the Bankruptcy Code.

Likewise, Bankruptcy Code Section 101(5) defines "claim" as "a right to a payment, whether or not such right is reduced to judgment," or "a right to an equitable remedy for breach of performance if such breach gives rise to a right to a payment." Looking to state law, the court determined that the judgment creditors each had an enforceable "right to payment" derived from the $656,683 pre-petition state court judgment. Therefore, the court held that, given the plain language of Section 303, the judgment creditors were entities holding claims against Zapas, and each was thus qualified to sign the involuntary petition against Zapas.

The court next considered Zapas' argument that the judgment creditors constituted a single petitioning creditor since they held one "unseparated" judgment. In support of this position, Zapas relied on several nonprecedential cases wherein multiple interest holders were treated as a single petitioning creditor. The court rejected Zapas' argument, finding the cases cited by Zapas to be unpersuasive and/or readily distinguishable.

For example, in In re McMeekin, 16 B.R. 805 (Bankr. D. Mass. 1982), a husband and wife were found to constitute a single petitioning creditor where they held a judgment based on a promissory note payable to them jointly. There, the judgment arose out of the debtor's obligation to pay the husband and wife fixed payments pursuant to a written promissory note. Despite the fact that the underlying obligations had been reduced to judgment, the McMeekin court looked at the underlying promissory note to determine the obligations of the debtor and the petitioning creditors. The McMeekin court relied on the applicable state Uniform Commercial Code (UCC) to conclude that a promissory note payable to two or more people was enforceable only by all of them. Accordingly, the McMeekin court held that because there was only one right to payment under state law, the husband and wife held only a single claim.

Similarly, in In re Atwood, 124 B.R. 402 (S.D. Ga. 1991), the bankruptcy court (in a decision affirmed by the district court) held that two petitioning creditors, as joint holders of a judgment, held one claim between them for purposes of commencing an involuntary petition under Section 303(b). There, two petitioning creditors sued the debtor on claims arising from a joint venture arrangement. The two petitioning creditors held a shared legal claim and one held a separate legal claim. The state court entered a judgment in their favor against the debtor, combining the amount of damages assessed for both legal claims in favor of both petitioning creditors. The Atwood court held that because the petitioning creditors held the judgment jointly, the judgment only placed one obligation on the debtor to pay both creditors and the creditors only had one "right to a payment." The Atwood court primarily relied on McMeekin, reasoning that the petitioning creditors' status as "co-holders of a judgment is similar to that of joint-payees on a promissory note."

The Zapas court disagreed with the rationale of Atwood, and refused to apply the New York state UCC by analogy to judgments not arising from rights under the New York UCC. The court noted that the New York UCC "is restricted to commercial paper and is designed to protect persons engaged in commercial transactions involving instruments for the payment of money." Because the New York UCC does not apply to court-ordered money judgments, and given that the Zapas parties' underlying contract was presumably oral (thus lacking any underlying negotiable or applicable non-negotiable instrument), the Zapas court concluded that the legal reasoning applied by the Atwood court was inappropriate. In addition, the court recognized that while the Zapas judgment listed the judgment creditors "in the conjunctive and did not provide that each would receive separate awards but rather issued an undivided judgment for $656,683.15, nothing under New York law … prevents each party from enforcing or executing on the judgment without the joinder of the others."

It is important to note what Zapas does not stand for: The proposition that a court will never look behind a shared judgment to determine whether a group of judgment holders should be considered a single petitioning creditor. To the contrary, the Zapas court noted that bankruptcy courts can—and often do—"look beyond pre-petition judgments to determine the nature of the underlying obligations." In making that point, the bankruptcy court hinted that it might very well have looked beyond the judgment to make a more reasoned determination of the nature of Zapas' obligation. However, because of the fact that the pre-petition judgment against Zapas was entered by default, the bankruptcy court had very little before it to make such a determination. In any event, the Zapas decision leaves open the possibility that multiple creditors holding a single judgment may be considered as separate creditors for purposes of Section 303(b)(1).

This article originally appeared in The Legal Intelligencer

Rudolph J. Di Massa, Jr., a partner at Duane Morris, is a member of the business reorganization and financial restructuring practice group. He concentrates his practice in the areas of commercial litigation and creditors' rights. Jarret P. Hitchings is an associate in the firm's Wilmington, Delaware, office and practices in the area of business reorganization and financial restructuring.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.