Western Governors University (WGU) ACCT3350 D216 Business Law for Accountants Practice Exam

In the context of involuntary bankruptcy under the U.S. Bankruptcy Code, a minimum of three unsecured creditors is required to file a petition for involuntary bankruptcy against a debtor if the debtor has more than 12 creditors. This is based on the provision that outlines the conditions under which creditors can initiate bankruptcy proceedings against a debtor.

The rationale behind requiring three unsecured creditors is to ensure that there is a consensus among a sufficient number of creditors, reflecting a true inability of the debtor to meet their obligations. This helps to protect the rights of debtors and ensures that involuntary bankruptcy is not used frivolously or without proper cause.

If there were only one or two creditors trying to force the issue, it could create an imbalance or unfair advantage, especially if a significant portion of the creditors is not in agreement. This requirement acts as a safeguard within the bankruptcy framework to ensure that the decision to initiate involuntary proceedings has broad support among the creditors, thus preventing individual creditors from exerting undue influence over the financial situation of the debtor.