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Added as part of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, the purpose of Chapter 15 is to provide a mechanism for dealing with insolvency proceedings in which more than one country is involved.

Generally, a chapter 15 proceeding is filed alongside another, primary proceeding in the debtor’s home country. Additionally, a foreign debtor may file either a chapter 7 or a chapter 11 in the United States Bankruptcy Court if its assets located in the United States are sufficient enough to warrant a domestic bankruptcy.

A chapter 15 case is commenced when a foreign representative of the filing company files a petition for a “foreign proceeding.” This filing, which must be accompanied by documents that demonstrate a foreign bankruptcy has been commenced, gives the foreign company direct access to the United States Bankruptcy Courts. Upon the filing of a foreign proceeding, the bankruptcy court then designates the proceeding as either a “foreign main proceeding” or a “foreign non-main proceeding.” A foreign main proceeding occurs where the debtor has filed for bankruptcy in the country where its main interests lie, while a foreign non-main proceeding occurs where the debtor has filed in a country where the debtor has an established interest, but its main interest does not lie in that country. The automatic stay under section 362 of the Bankruptcy Code, as well as other bankruptcy protections and provisions, takes place where the debtor has filed a foreign main proceeding.

The ability for foreign corporations to file for bankruptcy in the United States courts not only provides a channel for debt relief for these overseas companies, but also opens up the channels for foreign corporations to take advantage of the federal and state district courts. Once the foreign debtor is recognized by the bankruptcy court under chapter 15, the foreign debtor may then seek further relief not only from the bankruptcy court, but from the federal and state courts as well. This “in” can be crucial for foreign companies whose main interest is located in a country that does not have a uniform system for debt relief.

Not only is the ability to file for bankruptcy in the United States bankruptcy courts important from a business and debt relief perspective, but from an international cooperation perspective as well. Where the basis for chapter 15 filings is the United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on Cross-Border Insolvency, Chapter 15 helps to facilitate positive, uniform international relations between foreign corporations and the United States. These relations are particularly important where some of the world’s largest foreign based corporations have extensive assets and investments in the U.S., including BP, which is headquartered in the United Kingdom, Toyota, which is headquartered in Japan, and Samsung, which is headquartered in South Korea. Chapter 15 provides a platform for these companies, amongst many others, to seek debt relief in the United States while Chapter 15’s underlying basis, the UNCITRAL Model Law, ensures that these cross-border insolvencies are executed uniformly between various countries.

While this article has used several large, well-known companies as examples of those corporations that may benefit from Chapter 15, a corporation need not be a corporate behemoth that does a majority of its U.S. based business in New York or Delaware to take advantage of Chapter 15. For example, since 2007, nine (9) different international companies have filed for chapter 15 bankruptcy in Colorado. Most of these companies were smaller multi-national companies, thus demonstrating that bankruptcy’s newest chapter is open to provide debt relief to all multinational companies, big or small, who conduct business within the United States.

By Jordan Thomas, Law Clerk 2022