Chapter 15 of the U.S. Bankruptcy Code provides a legal framework for dealing with cross-border insolvency cases. Enacted as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Chapter 15 aims to promote cooperation between U.S. courts, foreign courts, and parties involved in international bankruptcy proceedings. It is based on the Model Law on Cross-Border Insolvency, developed by the United Nations Commission on International Trade Law (UNCITRAL).
The primary objective of Chapter 15 is to protect the interests of all stakeholders in a bankruptcy case that spans multiple jurisdictions. It facilitates the efficient administration of such cases, ensures fair treatment of creditors, and maximizes the value of the debtor’s assets.
Requirements for Filing Bankruptcy Under Chapter 15
Filing for Chapter 15 bankruptcy involves several specific requirements and steps:
1. Recognition of Foreign Proceeding
The initial and most crucial step in a Chapter 15 case is obtaining recognition of a foreign proceeding. A foreign representative, usually appointed in the foreign bankruptcy case, must file a petition for recognition with a U.S. bankruptcy court.
2. Eligibility of the Foreign Representative
The foreign representative must be duly authorized to act on behalf of the debtor in the foreign proceeding. This individual or entity could be a liquidator, trustee, or other court-appointed official managing the debtor’s assets and affairs.
3. Foreign Main or Non-Main Proceeding
The foreign proceeding must be classified as either a “foreign main proceeding” or a “foreign non-main proceeding”:
- Foreign Main Proceeding: A case pending in the country where the debtor has its center of main interests (COMI). Recognition of a foreign main proceeding grants automatic stay and other relief similar to a U.S. bankruptcy case.
- Foreign Non-Main Proceeding: A case pending in a country where the debtor has an establishment but not its COMI. Recognition of a foreign non-main proceeding provides more limited relief.
4. Required Documents
The foreign representative must submit the following documents to the U.S. bankruptcy court:
- A certified copy of the decision commencing the foreign proceeding and appointing the foreign representative.
- A certificate from the foreign court affirming the existence of the foreign proceeding and the appointment of the foreign representative.
- A statement identifying all foreign proceedings with respect to the debtor that are known to the foreign representative.
5. Petition for Recognition
The foreign representative files a petition for recognition with the U.S. bankruptcy court, providing all required documents and supporting information. The court will then determine whether the foreign proceeding should be recognized as a main or non-main proceeding.
6. Notice and Hearing
After the petition is filed, the court schedules a hearing to consider the recognition request. Notice of the hearing must be provided to the debtor, creditors, and other interested parties. If the court grants recognition, the foreign representative can proceed with administering the debtor’s U.S. assets.
7. Relief Upon Recognition
Once a foreign proceeding is recognized, the foreign representative can seek various forms of relief, including:
- Automatic Stay: Similar to the stay in a Chapter 7 or Chapter 11 case, which halts all collection actions against the debtor’s assets in the U.S.
- Administration of Assets: The foreign representative can manage and dispose of the debtor’s U.S. assets, subject to court approval.
- Additional Relief: The court may grant further relief as necessary to protect the debtor’s assets or the interests of creditors, such as entrusting the distribution of U.S. assets to the foreign representative.
8. Coordination with Foreign Proceedings
Chapter 15 emphasizes cooperation and coordination between the U.S. court and the foreign court overseeing the main bankruptcy proceeding. This cooperation ensures that actions taken in the U.S. are consistent with the objectives of the foreign proceeding and vice versa.
9. Protection of Creditors and Other Interested Parties
The court ensures that the interests of creditors and other stakeholders are protected throughout the Chapter 15 process. This includes providing creditors with notice and the opportunity to be heard in court proceedings.
Bankruptcy Chapter 15 is a vital tool for managing international insolvency cases, ensuring cooperation and coordination between jurisdictions. By providing a structured process for recognizing and administering foreign bankruptcy proceedings in the U.S., 15 Chapter helps protect the interests of debtors, creditors, and other parties involved. Understanding the requirements and procedures for filing Chapter 15 is crucial for any foreign representative seeking to navigate the complexities of cross-border insolvency.