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United States Bankruptcy Law

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Celia Porras

on 2 December 2013

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Transcript of United States Bankruptcy Law

United States Bankruptcy Law
Chapter 15: Ancillary and Other Cross-Border Cases

Historical Background
“Bankruptcy” comes from mixing ancient Latin words bancus-a bench or table and ruptus-broken

People gathering in public places with benches

Lend money to borrowers who would return it with interests

The tax collectors would come to their bench and smashed it with an axe

Italian roots since bench in Italian is “banca” and ruined is “rotta”

French expression “banque route, table trace.”
Title 11 of the USA Code
Chapter 15: Ancillary and Other Cross-Border Cases
Mechanisms for solving international insolvency cases

The debtor or its property is subject to the laws of the United States and one or more foreign countries

A chapter 15 case is ancillary or auxiliary to a primary proceeding brought in another country which is typically the debtor’s home country

It gives foreign creditors the right to participate in US Bankruptcy cases and it strongly prohibits any kind of discrimination
Goals and Objectives
Provide the audience with basic knowledge on the subject

Clearly define Chapter 15 of the US Bankruptcy Law

Show how the benefits outweigh the negative aspects of the law
Window of opportunities
Liquidation, Reorganization, Repayment Plan
By: Celia Porras

Goals and Objectives

Historical Background

Description of the Subject in Detail

Analysis of the Subject/SWOT

Prescriptions and Recommendations

Difficulties in Implementation

Solution to the Difficulties


Chapter 7
Chapter 11
Chapter 13
Chapter 15
Chapter 15-anciallary and other cross-border cases
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
Bankruptcy and USA
Only used as temporary responses to bad economic conditions
1800 - the first official bankruptcy law was enacted in response to land speculation
1841- the second bankruptcy law was passed
1867- the third law was passed because of the economic upheaval of the Civil War
1898- the Bankruptcy Act established was the first act to give companies in trouble the option of being protected from creditors
Bankruptcy Acts in 1933 and 1934.
Model Law on Cross-Border Insolvency promulgated by UNCITRAL
Assist states to equip their insolvency laws with a modern legal framework
Authorizing and encouraging cooperation and coordination between jurisdictions
“[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”
Federal Rules of Bankruptcy Procedure
Limit Involvement of the Debtor
“341 meeting,”
Bankruptcy Courts
Federal courts
94 federal judicial districts
The United States bankruptcy judge
Bankruptcy process is an administrative one
Discharge in Bankruptcy
Debtor is released from personal liability

No longer legally required to pay the debt

Prohibits the creditor of the debtor from taking any form of collection action on discharged debts

A discharge is a permanent ruling, but it might be revoke

Not all debts are discharged

Voluntarily repay any discharge debt
Bankruptcy Administrators
The United States Congress established the bankruptcy administrator program in 1986.

The bankruptcy administrator offices are located in the six judicial districts of Alabama and North Carolina.
Chapter 7
Trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors
Chapter 9
Adjustment of Debts of a Municipality
Only a municipality like cities, towns, villages, counties, and school districts can file for chapter 9 bankruptcy cases
Chapter 11
Commercial enterprises that desire to continue operating

Repay creditors through a court approved plan of reorganization
Chapter 12
Debts of a Family Farmer or Fisherman with Regular Annual Income
Provides a debt relief by proposing a plan to repay debts over a period of time
Chapter 13
Adjustment of Debts of an Individual with Regular Income
Debtor remains in possession of the property of the estate and makes payments to creditors based of the debtor’s anticipated income over the time of the plan
Bankruptcy Filing Fees
 Cooperation between the US courts and the courts of foreign countries

 Greater legal certainty for trade and investment

 Provide for the fair and efficient administration of cross-border insolvencies

 Afford protection and maximization of the value of the debtor’s assets

 Facilitate the rescue of financially troubled businesses; protecting investment and preserving employment

Nature of its proceeding
Ancillary or secondary
Not the main bankruptcy proceeding relating to the foreign individual or entity
When Filing...
Foreign representative requesting the recognition of a foreign proceeding
Foreign main proceeding
Foreign non-main proceeding
After Recognition...
Seek for additional relief from the bankruptcy court or even other state and federal courts
Authorized to bring a full, instead of ancillary, bankruptcy case
Jurisdiction of the Court
Limited in the scope of its power to assets of the foreign entity or person that are within the United States
US Court defers to actions of the foreign courts
To not interfere in the affairs of foreign country in excess
Applies when...
Protect a foreign debtor’s assets located in the United States from a creditor attack
Establish procedures for US creditors to follow for filing proofs of claim against a foreign debtor
Bind creditors to the terms of a restructuring plan approved and implemented in a foreign proceeding
Asset sales approved in a foreign proceeding
SWOT Analysis
Automatic Stay Protection
Protection of Property
Repayment Plan
Lawyer is needed
Limitations on types of debts
Effect on credit
Cost of filing for bankruptcy
Fresh Start
Continuation of the business
Learn from mistakes
Changes in government regulations
Property loss
Prescriptions and Recommendations
Extend the types of debts that are applicable to the law
More Regulations when filing for bankruptcy
Promotion of Chapter 15
Difficulties in Implementation
Solutions to the Difficulties
Clearly dictate:
who is eligible
amount of debt
Guidance to make a repayment plan
Bankruptcy Abuse Prevention and Consumer Protection Act
More Marketing
Seminars about the subjet
Availability of information
Passing of new bankruptcy bill
consumer-credit counseling
prevent unecessary bankruptcy filings
protect individuals from their own lawyers
Second chance to start fresh
6 types of bankruptcy chapters
Chapter 15 opens the US Bankruptcy Courts to foreigners
“Today, certain people file for bankruptcy, businesses and individuals, and it no longer has the stigma it once had. Now it’s almost considered wise, a way to regroup and come back again.”

- David Dinkins, Former Mayor of New York City
Full transcript