State of Montana Department of Revenue v. Blixseth, No. 18-15064 (9th Cir. 2019)
Annotate this CaseA claim is subject to a bona fide dispute as to amount within the meaning of 11 U.S.C. 303(b)(1) even if a portion of that claim is undisputed. The Ninth Circuit affirmed the bankruptcy and district court's decisions holding that the MDOR lacked standing to file the involuntary Chapter 7 bankruptcy petition against debtor. Section 303(b)(1) states that petitioning creditor's claims must not be contingent or the subject of a bona fide dispute as to liability or amount. In this case, the MDOR's claim for the 2004 tax year was subject to a bona fide dispute as to amount notwithstanding debtor's concession that the deduction challenged in Audit Issue 4 was improper. However, because all other petitioning creditors have withdrawn from the proceedings, the panel remanded to the bankruptcy court to determine whether this case should be dismissed under section 303(j)(3).
Court Description: Bankruptcy. The panel affirmed in part decisions of the bankruptcy and district courts, holding that the Montana Department of Revenue, a creditor holding a claim that was partially disputed as to amount, lacked standing to file an involuntary Chapter 7 bankruptcy petition against a debtor under 11 U.S.C. § 303. Because all other petitioning creditors had withdrawn from the proceedings, the panel remanded to the bankruptcy court to determine whether the case should be dismissed. Under 11 U.S.C. § 303(b)(1), a petitioning creditor’s claims must not be (1) contingent or (2) “the subject of a bona fide dispute as to liability or amount.” The panel concluded that the Montana Department of Revenue’s claim for the 2004 tax year was subject to a bona fide dispute as to amount notwithstanding the debtor’s concession that a deduction challenged in an audit was improper. Joining the First and Fifth Circuits, the panel held that a claim is subject to a bona fide dispute as to amount even if a portion of that claim is undisputed.
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