Chapter 15 Bankruptcy

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Chapter 15 Bankruptcy deals with cases of cross-border insolvency. The primary purpose of Chapter 15 Bankruptcy is to promote cooperation between US courts, their authorized representatives, and foreign courts and provide greater predictability and fairness to debtors and creditors in international bankruptcy proceedings. The United States Bankruptcy Court is allowed to “cooperate to the fullest extent possible” with foreign courts and entities. The United States Bankruptcy Court will be subject to many of the foreign court’s actions in Chapter 15 cases.

In a Chapter 15 case, a foreign representative petitioned the U.S. Bankruptcy Court to ” recognize ” the foreign proceeding. A representative who does not have control over a foreign debtor may not bring a Chapter 15 case, whether under readily established law or under a particular order of the foreign court that appointed the representative.

Chapter 15 Bankruptcy filed with primary proceedings brought in another country, usually the debtors. If initiated by a foreign representative, the bankruptcy court’s jurisdiction is generally limited to the debtor’s assets located in the United States. After a foreign entity files for Chapter 15 bankruptcy, a US bankruptcy court may authorize the appointment of a trustee or an expert to act in another country on behalf of the bankruptcy estate in the United States.

Chapter 15 allows a representative in a non-US business bankruptcy (also known as “international insolvency”) access to the US court system. In essence, Chapter 15 allows foreign individuals or companies to file for bankruptcy protection in the United States when assets in more than one country are involved. Chapter 15 governs the provision of relief under US bankruptcy law to non-US companies and individuals in “foreign proceedings” 2 seeking to protect their US assets from foreclosure or outright appropriation by individual creditors. Chapter 15 also gives foreign creditors the right to participate in US bankruptcy cases. Chapter 15 prohibits discrimination against foreign creditors.

Chapter 15 Bankruptcy provides an effective mechanism for handling insolvency cases involving debtors, assets, claimants, and other stakeholders. Chapter 15 allows the U.S. Bankruptcy Court to review interpretations of similar statutes promulgated by foreign jurisdictions and guidance issued by UNCITRAL on the Model Law for Chapter 15 Interpretation, including definitions of centers of main interests. Likewise, Chapter 15 allows a court to deny or “promote” a foreign bankruptcy proceeding if the action required under U.S. law is “Clearly Contrary to Public Policy.”

Foreign debtors increasingly use Chapter 15 to enforce creditor lawsuits against their U.S. assets resulting in fraudulent transfers of persons and disclosure searches. A popular place to file for Chapter 15 bankruptcy in the United States Bankruptcy Court for the Southern District of New York (SDNY).

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