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Legal Update

Second Circuit Holds that Chapter 15 Debtors Must Satisfy Eligibility Requirements of Section 109(a) of the Bankruptcy Code in Order to be Eligible for Relief

16 December 2013
Mayer Brown Legal Update
In a case of importance to foreign representatives of foreign debtors seeking the assistance of US courts pursuant to chapter 15 of the Bankruptcy Code, the US Court of Appeals for the Second Circuit has held that the debtor eligibility requirements of section 109(a) of the US Bankruptcy Code apply in cases under chapter 15 as they would in cases under other chapters of the Bankruptcy Code. As a result, in addition to the various requirements for relief contained in chapter 15 itself, a foreign debtor must satisfy the threshold eligibility requirements under section 109(a) to be a debtor: namely, the foreign debtor must reside or have a domicile, a place of business or property in the United States. Given that courts have liberally construed what constitutes “property in the United States” for purposes of a debtor’s eligibility under section 109(a), however, the requirement that a foreign debtor must be an eligible debtor under section 109(a) in order to qualify for any relief under chapter 15 should not pose a substantial barrier to the commencement of cases under chapter 15 in the vast majority of situations.

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