By Ryan C. Wood

Have you ever heard Chapter 15 of the bankruptcy code?  Most likely you have not and most bankruptcy attorneys do not file these types of cases.  Most people did not know about Chapter 9 of the bankruptcy code until the recent high profile bankruptcy cases of various municipalities throughout the United States.  Chapter 15 was created in 2005 when the bankruptcy code was amended.  So why did another chapter need to be created.  You can already liquidate of assets and there are two chapters to reorganize debts.  Family farmers and fisherman have their own special chapters along with municipalities.

So what is Chapter 15 for?  Rules already exist for insolvency proceedings for companies that do business in multiple countries.  The United Nations Commission on International Trade Law governs insolvency internationally.  Prior to the creation of Chapter 15 there was section 304 of the bankruptcy code and involves debtors, assets claimants and parties with interests that include countries other than the United States.  The idea is to help cooperation between courts of the United States and courts of foreign countries.  If you are doing business overseas you already know that there is uncertainty when dealing with other countries and their laws.  If things go bad there is now more certainty, or at least that is the idea, when dealing with a cross-border insolvency situation.  Like the others chapters of the bankruptcy code the point is to treat all parties involved fairly and maximize assets for the benefit of those who are owed money.  Another goal is to help these troubled businesses to hopefully save jobs and protect the investments that have already been made.  Normally a chapter 15 case is part of some other proceeding in another foreign jurisdiction.  That does not mean a chapter 7 or reorganization under chapter 11 will not take place too.  There could be a number of parties that have assets in the United States or debts owed to parties that require administration under the bankruptcy code’s other chapters.

When a chapter 15 is initiated by a foreign representative is allows the foreign entity to obtain an automatic stay and continue to operate.  Another goal is to provide the foreign debtors and creditors protection from discrimination.  This is a very complicated area of the bankruptcy law and this article just scratches the surface of what is possible and how.  Consult an experienced bankruptcy lawyer in your jurisdiction if you believe you have foreign debts issues that need to be resolved.  As business outside of the United States continue to operate within the Unites States this chapter of the bankruptcy code will become used more often.  Hopefully more cooperation will result with foreign courts for the benefit of employees and those who are owed money.