Chapter 15 Bankruptcy FAQs – Ancillary and Cross-Border

1.What is Chapter 15 Bankruptcy?

Under Chapter 15 a representative of a corporate bankruptcy (insolvency) proceeding outside the U.S. can obtain access to the United States courts.

2.What is the purpose of Chapter 15 Bankruptcy?

The purpose of Chapter 15, and the Model Law on which it is based, is to provide effective mechanism for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country.

3.How does Chapter 15 Bankruptcy work?

Generally, a Chapter 15 case is ancillary to a primary proceeding brought in another country, typically the debtor’s home country.

4.What other alternatives do I have?

As an alternative, the debtor or a creditor may commence a full Chapter 7 or Chapter 11 case in the United States if the assets in the United States are sufficiently complex to merit a full-blown domestic bankruptcy case. In addition, under Chapter 15 a U.S. Court may authorize a trustee or other entity (including an examiner) to act in a foreign country on behalf of a U.S. Bankruptcy estate.

5.What are the consequences of filing Chapter 15 bankruptcy?

There are several things that occur as result of filing Chapter 15 Bankruptcy. One or more representatives of US debtors can participate in the principal bankruptcy proceedings in a foreign court. Depending on how debt repayment in the court is structured, if there is debt repayment, these representatives might be able to obtain some repayment for debt. In any case, any US lender’s claim to repayment rights would be considered with the claims of all foreign lenders.

6.What is the most important goal of Chapter 15?

One of the most important goals of Chapter 15 is to promote cooperation and communication between U.S. courts and parties of interest with foreign courts and parties of interest in cross-border cases.

7.What if there is a pending case in another jurisdiction?

If a full bankruptcy case is initiated by a foreign representative (when there is a foreign main proceeding pending in another country), bankruptcy court jurisdiction is generally limited to the debtor’s assets that are located in the U.S. The limitation promotes cooperation with the foreign main proceeding by limiting the assets subject to U.S. jurisdiction, so as not to interfere with the foreign main proceeding.

8.What is the UNCITRAL Model Law?

Chapter 15 incorporates the Model Law on Cross Border Insolvency drafted by the United Nations Commission on International Trade Law. The law provides solutions to problems which arise in connection with cross border bankruptcy, allowing US courts to issue subpoenas, orders to turn over over assets, the issuance of stays on pending actions, and orders of other types as circumstances dictate. The ancillary proceeding permitted under Chapter 15 is often a more efficient and less costly alternative to initiating an independent bankruptcy proceeding in the United States. It also avoids the conflicts which could arise between the jurisdictions involved in two independent bankruptcy proceedings initiated in connection with the same debtor.

9.How much does it cost to file Chapter 15?

The mandated court filing fees for filing Bankruptcy Chapter 15 are $1,039 USD. Attorneys fees vary depending on the complexity of the Chapter 15 case (travel or local counsel, if any, number of creditors, number of creditors who file a dispute, complexity of the debtor’s financial situation, etc.). At a minimum, a Chapter 15 will likely cost $15,000.00 in filing and attorney’s fees. However, it could easily be much more than that depending on the factors mentioned above.