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What is Chapter 15?

Chapter 15 bankruptcy is a newer type of bankruptcy filing that has only been around since 2005.

It allows foreign companies access to the US bankruptcy court system in certain circumstances. This is part of the US’s compliance with international trade laws. Part of the aim of bankruptcy law is to preserve employment and protect investment.

In an increasingly globalized economy it is understandable that the US could offer hearings to corporations which straddle national borders but are not based in the US.

The United Nations Commission for International Trade Law (UNCITRAL) made agreements and resolutions concerning international bankruptcy cases, and Chapter 15 is the US’s compliance with those agreements. Chapter 15 can be filed by a foreign entity if an insolvency case in another country has begun.

The US may decide to classify it as foreign-main or non-main depending on how much of the foreigner’s interests lie in that country or in the US. Foreign-main designations may still allow the foreigner to protect all of their assets held within the US, which is called an automatic stay.

The idea is that the US proceeding can be ancillary to the foreign proceeding or the foreigner can ultimately have a Chapter 7 or 13 filing start in the United States.

In either case, the US court attempts to offer some protection for the rights of foreigners who have some assets within the US, especially in the event that the court system in the foreign country behaves questionably.

Keywords: Chapter 7, Chapter 13, United Nations (UN), UNCITRAL, foreign investors, bankruptcy filings, Chapter 15,