Chapter 15 Bankruptcy

Chapter 15 of the U.S Bankruptcy Code was created in 2005 to allow cooperation between the U.S. and foreign courts in cases where foreign bankruptcy proceedings are affecting U.S. financial interests.

This section was created in response to a United Nations recommendation that nations cooperate on “cross-border” insolvency.

Understanding Chapter 15

Chapter 15 bankruptcy has the primary purpose of encouraging cooperation between U.S courts, their designated representatives, and foreign courts. It also helps to make international bankruptcy proceedings more predictable and fair for creditors and debtors.

As such, Chapter 15 focuses on jurisdiction. It also seeks to protect the debtor’s assets, and, if possible, financially rescue an insolvent company.

Chapter 15 permits a representative to access the U.S. courts system in a case of corporate bankruptcy that has been filed in another country (also called a “cross border insolvency”). 

This mechanism is designed to be efficient and simple in addressing insolvencies involving creditors, debtors, and assets that are associated with more than one country. These are the objectives of Chapter 15. They are listed in Title 11, Chapter 15, Section 1551 of the U.S. Code 3.

Encourage cooperation between U.S. courts, parties of interest, and courts from other countries involved with cross-border insolvencies

Better legal foundations for cross-border trade and investment

Facilitating cross-border insolvency administration that is more efficient and protects all interests

Protecting the assets of the debtor

Assistance to financially troubled businesses

Chapter 15 History

Chapter 15 was included in the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act of Georgia. It was based on “Model Law on Cross-Border Insolvency” by the United Nations Commission on International Trade Law.

To reduce the risk for creditors and other stakeholders of international companies, 48 countries have adopted the law, which includes Japan, Canada, and China.

Chapter 15, Title 11 of the United States Code is also known as Chapter 15. Its origins are in Section 304 of the U.S. Bankruptcy Code, which was enacted in 1978. Due to the increase in bankruptcies involving multiple jurisdictions, Section 304 was removed in 2005 and replaced by Chapter 15. 5

The Old Chapter 15

Chapter 15 served a different purpose from 1978 to 1986 as it related to the Bankruptcy Code. Chapter 15 was used to refer to the United States Trustee Program. This program is a U.S. Department of Justice program that oversees the administration of bankruptcy cases as well as the private trustees who participate.

In this context, Chapter 15 was used to trial bankruptcy cases in certain judicial districts. It allowed trustees to exercise the powers that were once reserved for bankruptcy judges. These changes were accepted and incorporated into the Bankruptcy Code.