Bond and Penalty for bad claim. (Acts as disincentive to file involuntary claims).
1. 303(e) After notice and a hearing, and for cause, the court may require the petitioners under this section to file a bond to indemnify the debtor for such amounts as the court may later allow under subsection (i) of this section.
2. 303(i): if the court dismisses the pet, the court can grant judgment (1) against the petitioner and in favor of the debtor for (A) costs or (B) reasonable atty’s fees or (2) against any petitioner that filed the pet in bad faith for (A) any damages proximately caused by such filing or (B) punitive damages.
3. Free rider problem—those creditors who don’t file claim won’t have to pay the bond and don’t have to take on the risk that they will have to pay costs under 303(i), but they will still get paid in b/r.
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