Considerations for Creditors During the Gap Period in Involuntary Cases

Involuntary bankruptcies filed pursuant to §303 of the Bankruptcy Code are somewhat distinct from voluntary bankruptcies filed under §301. The most dramatic differences between the two types of bankruptcies are revealed during the “time period between the filing of the involuntary petition and the entry of the order for relief,” commonly referred to as the “gap period.” Specifically, the differences between involuntary and voluntary bankruptcy filings can affect the priority of claims against the debtor. Thus, the differences are of particular importance to creditors doing business with debtors during the gap period.

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