Established as part of the Bankruptcy Abuse Prevention and Consumer Protection Act that was reformed the process of discharging debt in 2005, Chapter 15 Bankruptcy is the least-known of the processes for individuals and corporations.
In general, bankruptcy is a motion brought in federal district court to alleviate overwhelming debt incurred by individuals or businesses. The process allows many to discharge debts and start anew, or to maintain business operations while reorganizing and emerging from bankruptcy with a streamlined and stronger business.
Chapter 15 is designed to open U.S. bankruptcy courts to international affairs under the United Nations Commission on International Trade law, allowing foreign nationals to resolve insolvency through U.S. courts. The objectives of Chapter 15 include greater stability among trading partners, preserving employment, and to provide effective and fair solutions in events of international insolvency. It is a recognition that businesses increasingly are not limited by international boundaries.
How Chapter 15 Bankruptcies Work
Chapter 15 is anticipated to be secondary to a bankruptcy proceeding in the debtor's home country. Once a foreign bankruptcy proceeding is confirmed, filing Chapter 15 opens communication between U.S. and foreign bankruptcy proceedings as well as triggering an automatic stay that limits creditors' ability to pursue collection of debts. The foreign entity handing an offshore bankruptcy may request assistance of U.S. bankruptcy officials through this channel; Chapter 15 allows cooperation so long as fraudulent transfer of assets in question is prohibited, creditors are treated fairly, and assets are distributed lawfully. A trustee may be named to monitor proceedings in the foreign country to ensure fair treatment of creditors.
Some businesses may proceed to file Chapter 7 or 11 bankruptcy in the U.S. after the initial Chapter 15 bankruptcy, depending on the company's size and the complexity of the business interests at stake.
Few businesses take advantage of this process: in 2015 there were 85 Chapter 15 filings, in 2014 there were 59, in 2013 there were 82, and in 2012 there were 116.