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When Does Chapter 15 Matter?

The Bankruptcy Code’s relatively new Chapter 15 might play more of a role in a New York bankruptcy than in other states, so debtors here might want to know if it affects them. Congress added the chapter in the bankruptcy reform of 2005. Its purpose differs from other chapters debtors can file in: 7, 9 (for municipalities), 11, 12 (for farmers), and 13. Chapter 15 incorporates the Model Law on Cross-Border Insolvency, which was created by the United Nations Commission on International Trade Law (UNCITRAL) in 1997. The UNCITRAL crafted the Model Law to help efficiently resolve bankruptcy cases involving parties and assets in multiple countries. As a result, courts must interpret it consistently with other countries that have adopted it.

Chapter 15 differs from the other chapters in that it’s ancillary to other bankruptcy proceedings. “Ancillary” means supporting or supplementing. In the bankruptcy context, chapter 15 isn’t the primary chapter debtors file in; instead, debtors have either filed a case in their own countries or in the United States but their cases involve parties, assets, or debts that are outside of it. A foreign debtor can commence a chapter 15 case if a “foreign representative” asks a bankruptcy court to recognize a “foreign proceeding” as defined by the chapter. These proceedings can be further characterized as “foreign main proceedings” or “foreign non-main proceedings,” the distinction being the debtor’s main center of interests. The foreign representatives can also operate the debtor’s business in the United States.

Foreign debtors can choose to initiate a primary bankruptcy case in the U.S. as well, assuming the debtor’s U.S. interests are justifiably significant. Chapter 15 also enables U.S. bankruptcy courts to give trustees, examiners, or other agents, the authority to act on behalf of a bankruptcy estate in a foreign country. This power can be very helpful to cross-border bankruptcies.

The important question is: How many countries have adopted the Model Law? As of now only a handful—but an important handful: Canada, Mexico, and Japan. Although, in principle, foreign debtors can use the chapter to the extent it advances their interests consistent with the goals of the statute. Nevertheless, it’s to the advantage of many debtors that the chapter has been adopted by the two countries bordering the U.S.

You can read more on chapter 15 here.

International business is becoming more complex, and Internet sales can play a substantial role in debtors’ enterprises. Also, because so many debtors, including immigrants and businesspeople, might have cross-border bankruptcy cases, chapter 15 can play a helpful role. If you have a complex, international bankruptcy case, then you need to discuss it with an experienced New York bankruptcy lawyer.

For answers to more questions about cross-border bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Chapter 13 bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA

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