Involuntary Bankruptcy | Chapter 7 filed against RPS Environmental Solutions, LP | January 11, 2013

Chapter 7 filed against RPS Environmental Solutions, LP on January 11, 2013

On January 11, 2013, an involuntary bankruptcy petition under Chapter 7 was filed against RPS Environmental Solutions, L.P. under Chapter 7 of the Bankruptcy Code.  The petitioning creditors were listed as Ryan Osbourne (Dallas), Paul Waggoner (Dallas), John Himelfarb (Dallas), Arthur Brady (Frisco), Jay Sterne (Alexandria, VA) and RHI Print Communications, LLC (Kent Aurand, COO) (Flower Mound, TX).  The petitioning creditors assert approximately $395,000 in claims.  The petition is pending before the Honorable Barbara J. Houser, United States Bankruptcy Judge in the Dallas Bankruptcy Court.

According to its website,”RPS is a technology company that provides safe, effective and sustainable cleaning and remediation products and services for industrial, commercial and consumer customers.”   Its website indicates that its executives include Scott Olson, J.D., Robert E. Hill, Tim Ross, John Himelfarb (presumably the same as the named petitioning creditor), Paul Waggoner, CPA (presumably the same as the named petitioning creditor), Arthur Brady, J.D. and Frank Day, J.D.  According to the website, Some of the officers have their backgrounds with large law firms and CPA firms.

Involuntary Bankruptcy

A creditor holding an unsecured debt may be able to force his debtor into bankruptcy, even if the debtor refuses to file bankruptcy on his own behalf. The process is called an “involuntary bankruptcy” and is covered by Section 303 of the Bankruptcy Code.

Not just any creditor can use involuntary bankruptcy. The creditor must hold an unsecured claim of at least $5,000.00 against the debtor, and the debtor must have fewer than twelve unsecured creditors. Otherwise, the creditor will have to join with other creditors to file the lawsuit. In that case, there must be at least three creditors with unsecured claims totaling at least $14,425.00 against the debtor. Additionally, involuntary bankruptcy is not permitted against certain debtors. Those exempt from involuntary bankruptcy proceedings include insurance companies, banking institutions, farmers and charitable corporations. And while many creditors find the use of involuntary bankruptcy procedures invaluable, it is helpful to know that the process is further limited in that it may be used for Chapter 7 (liquidation) and Chapter 11 (rehabilitation), but not Chapter 13 (individuals).

Here, the  petitioning creditors have joined a number of creditors in excess of the minimum threshold; therefore, if the Court determines that one or more of the creditor claims are contested in good faith, there will (hopefully for the petitioning creditors), still sufficient petitioners to prosecute the petition.

An interesting question about this bankruptcy is, why are some of the petitioning creditors also listed as executives?  Is there a bank that is refusing to allow a voluntary bankruptcy?  Is there infighting among management?  Are controlling owners freezing out minority owners?  The Debtor will be filing an answer in approximately 30 days.  Maybe some of these answers will be forthcoming.

More information regarding Involuntary Bankruptcy