What is Chapter 15 of the Bankruptcy Code?

Have you ever heard of Chapter 15 of the bankruptcy code? Chances are, you haven’t, and most bankruptcy attorneys don’t file these types of cases. Most people were not aware of Chapter 9 of the bankruptcy code until the recent high-profile bankruptcy cases of various municipalities in the United States. Chapter 15 was created in 2005 when the bankruptcy code was changed. So why was it necessary to create another chapter? You can already liquidate assets and there are two chapters to reorganize debts. Family farmers and fishermen have their own special chapters together with the municipalities.

So what is chapter 15 for? There are already rules for insolvency proceedings for companies operating in several countries. The United Nations Commission on International Trade Law regulates insolvency at the international level. Before the creation of Chapter 15, section 304 of the bankruptcy code existed and involves debtors, asset claimants, and parties with interests that include countries other than the United States. The idea is to aid cooperation between the courts of the United States and the courts of foreign countries. If you are doing business abroad, you already know that there is uncertainty when dealing with other countries and their laws. If things go wrong, there is now more certainty, or at least that’s the idea, when it comes to a cross-border insolvency situation. Like the other chapters of the bankruptcy code, the point is to treat all parties involved fairly and maximize assets for the benefit of those to whom money is owed.

Another goal is to help these troubled companies save jobs and protect investments that have already been made. Typically, a Chapter 15 case is part of some other proceeding in another foreign jurisdiction. That does not mean that a Chapter 7 or Chapter 11 reorganization will not take place. There could be multiple parties that have assets in the United States or debts with parties that require administration under the other chapters of the bankruptcy code.

When a foreign representative initiates a chapter 15, the foreign entity is allowed to obtain an automatic stay and continue to operate. Another objective is to provide foreign debtors and creditors with protection against discrimination. This is a very complicated area of ​​bankruptcy law and this article only scratches the surface of what is possible and how. Consult an experienced bankruptcy attorney in your jurisdiction if you think you have external debt problems that need to be resolved. As businesses outside the United States continue to operate within the United States, this chapter of the bankruptcy code will be used more frequently. Hopefully, there will be more cooperation with foreign courts for the benefit of employees and those to whom money is owed.