Chapter 15, Title 11, United States Code

Chapter 15, Title 11, United States Code is a section of the United States bankruptcy code that deals with jurisdiction. Under Chapter 15 a representative of a corporate bankruptcy (insolvency) proceeding outside the U.S. can obtain access to the United States courts. It allows cooperation between the United States courts and the foreign courts, as well as other authorities of foreign countries involved in cross-border insolvency cases.

Jurisdiction issues

It happens with increasing frequency that a bankruptcy proceeding in one country has a connection to assets or information located in another. Because of the involvement of multiple jurisdictions unique problems arise. In order to solve some of these problems, the United States enacted Section 304 of the US Bankruptcy Code in 1978. Section 304 has recently been repealed and replaced with Chapter 15, titled "Ancillary and Other Cross Border Cases". This section has increased the range of options available in the United States in support of foreign bankruptcy proceedings.

UNCITRAL

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 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.

Chapter 15 also establishes mechanisms for the cooperation between US and foreign courts and representatives regarding proceedings which involve the same debtor.

Discretionary assistance

Whether the US courts will extend the "additional assistance" sought in connection with a foreign proceeding under Chapter 15 is a matter of discretion.

The main consideration the US courts will take into account in making this decision is whether the laws of the foreign jurisdiction in connection with which the additional assistance is sought violate the laws or public policy of the United States and if the foreign courts conduct their proceedings according to basic rules of procedural fairness.

Among other factors the US courts will consider how the foreign jurisdiction treats creditors, whether it prevents the fraudulent transfer of debtor's property, if US creditors are protected against prejudice in the processing of their claims there, and the manner in which assets are distributed.

The court may conduct an evidentiary hearing, including the hearing of expert testimony, to determine whether the proceedings of the foreign forum are sufficiently just to grant the assistance requested.

Original Chapter 15 (1978-1984)

The original 1978 Bankruptcy Code had a different Chapter 15 dealing with the United States Trustee Program, which it established as a trial in some judicial districts to assume roles which formerly belonged to the bankruptcy judge and others, including the selection and oversight of private trustees in individual cases. At that time, the other chapters of the Bankruptcy Code described how bankruptcy worked in districts without United States Trustees; original Chapter 15 modified the text of the other chapters for districts with United States Trustees. Section numbers in original Chapter 15 incorporated the section numbers in the main Code that they modified; for example, section 151325 (a section of original Chapter 15) modified section 1325, which sets the requirements of Chapter 13 plans.

Since the trial program was considered a success, Congress in 1984 ordered the creation of United States Trustees in all states except Alabama and North Carolina. Since original Chapter 15 now applied in most states, its text was then merged into the main Bankruptcy Code; separate provisions were enacted for Alabama and North Carolina, where other officers of the court assume the role of the United States Trustee.

References

• Cross Border Insolvency and the United States Bankruptcy Code