Chapter 15 Bankruptcy

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The purpose of Chapter 15 is to provide a mechanism for dealing with insolvency cases involving debtors, assets, claimants and other parties when more than one country is involved. It’s a new addition to the Bankruptcy Code, added with the Bankruptcy Abuse Prevention and Consumer Protection Act passed in 2005. It replaces section 304 and was a result of UNCITRAL – United Nations Commission on International Trade Law.

Bankruptcy Code specifies Chapter 15 is designed to meet the following objectives:

1. Promote cooperation between the U.S. courts and parties of interest and the courts of foreign countries involved in cross-border insolvency cases.

2. Establish greater legal certainty for trade and investment.

3. Provide for fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested parties.

4. Afford protection and maximization of the value of the debtor’s assets.

5. Facilitate the rescue of financially troubled businesses, to protect investments and preserve employment.

Usually a Chapter 15 supplements a primary proceeding filed in another country, typically the debtor’s home country. The debtor can also file a chapter 7 or chapter 11 in the U.S. if there are sufficient assets. A U.S. court may appoint a trustee or other entity to act in a foreign country on behalf of a U.S. estate. One of the most important goals of chapter 15 is to promote cooperation between U.S. courts and foreign courts. The appointed trustee must cooperate to the fullest extent possible.

The UNCITRAL Model Law has also been enacted in Canada, Mexico, and Japan. The United Kingdom and Australia, as well as several other countries, are considering similar laws.

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