Lesson 13: Chapter 15: Cross-Border Cases

Chapter 15 of the Bankruptcy Code is like the United Nations of bankruptcy—it helps manage insolvency cases that cross national borders. Whether you're dealing with debtors, assets, or creditors from different countries, Chapter 15 has your back.

Key Objectives of Chapter 15

  • Promote cooperation between the U.S. courts and foreign courts.
  • Provide greater legal certainty for trade and investment.
  • Ensure the fair and efficient administration of cross-border insolvencies.
  • Protect and maximize the value of the debtor's assets.
  • Facilitate the restructuring of viable businesses.

Recognizing Foreign Proceedings: The Legal Handshake

Think of it as the U.S. courts giving a high-five to foreign insolvency proceedings, but only if these conditions are met:

  • The foreign proceeding is a judicial or administrative proceeding. (No kangaroo courts, please!)
  • The foreign proceeding is collective in nature. (Involves more than one creditor.)
  • The foreign representative is duly authorized. (They’ve got their paperwork in order.)

For more details on the structure of the Bankruptcy Code, see our detailed guide on the Structure of the Bankruptcy Code.

Types of Proceedings

Chapter 15 distinguishes between two types of foreign proceedings:

  • Main Proceeding: A proceeding taking place in the country where the debtor has its center of main interests (COMI).
  • Non-Main Proceeding: A proceeding in a country where the debtor has an establishment, but not its COMI.

Process of Recognition

Files Petition
Criteria Met
Criteria Not Met
Foreign Representative
U.S. Bankruptcy Court
Review of Petition
Recognition Granted
Recognition Denied

Rights and Powers of the Foreign Representative

Once recognized, the foreign representative gains certain rights, such as:

  • Ability to operate the debtor's business.
  • Right to commence a full bankruptcy case under the Bankruptcy Code.
  • Right to seek relief in the U.S. courts.

Relief Available Under Chapter 15

Upon recognition, the foreign representative may seek various forms of relief, including:

  1. Staying of execution against the debtor's assets.
  2. Entrusting the administration or realization of the debtor's assets to the foreign representative.
  3. Suspending the right to transfer or dispose of the debtor's assets.

Types of Relief

Recognition Granted
Staying of Execution
Administration of Assets
Suspension of Transfers

Interplay with Other Bankruptcy Chapters

Chapter 15 works in conjunction with other chapters of the Bankruptcy Code, such as Chapter 7 and Chapter 11. This cooperation between U.S. and foreign proceedings enhances the efficiency and effectiveness of cross-border insolvency resolutions.

Example Alert for Foreign Representative's Powers

Note: The foreign representative is empowered to operate the debtor's business as per Chapter 15.

Conclusion

Chapter 15 provides a comprehensive framework for managing cross-border insolvency cases. By promoting cooperation between international courts and providing mechanisms for recognizing foreign proceedings, it ensures that insolvency cases with international elements are handled effectively and efficiently.

To understand more about who can file for bankruptcy, visit our guide on Who Can File for Bankruptcy?

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