Business bankruptcy: what is Chapter 15 of the Bankruptcy Code?
Most people in New York can identify three chapters of the United States Bankruptcy Code: Chapter 7 for the discharge of business and personal debts; Chapter 11 for business reorganization and Chapter 13 for personal debt reorganization. Very few can identify the purpose of Chapter 15. This post will provide a brief overview.
Chapter 15 was passed by Congress in 2005 to handle “Ancillary and Other Cross Border Cases.” The essential purpose of the statute is to give corporations involved in a foreign bankruptcy a means of protecting assets located in the United States. The statute works this way. A company that has filed for bankruptcy under the laws of a foreign county can file a petition under Chapter 15 if it has assets in this country that it wants to protect from creditors’ claims. The purpose of the statute is to encourage cooperation between foreign courts and United States courts; protect investments, assets and creditors; and facilitate insolvency hearings and corporate restructuring.
Chapter 15 proceedings are usually started by the appearance of a representative of the foreign bankruptcy court in the United States Bankruptcy Court for the purpose of filing a Chapter 15 petition. In order to be effective, the existence of the original proceeding must be proven to exist in a foreign country, and the rules of the court must treat all creditors equally. The rules of the foreign court cannot be inconsistent with U.S. public policy. Chapter 15 proceedings have varying goals, including inspection of documents, identification of assets of the debtor and recovery of assets.
Forty-three countries have adopted legislation that is similar to or based upon Chapter 15. Any party who receives a notice in a Chapter 15 case may wish to consult an experienced bankruptcy attorney for advice on how to proceed and how best to protect its property.
Source: Legal News Line, “Panel: Chapter 15 eases the way for cross-border bankruptcy proceedings,”