Chapter 15 is a new chapter added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. It replaces section 304 of the Bankruptcy Code. The new chapter was meant to compliment the Model Law on Cross-Border Insolvency (UNCITRAL) enacted by the United Nations in 1997.
Chapter 15, per Bankruptcy Code, is designed to meet the following objectives:
Promote cooperation between the U.S. courts and parties of interest and the courts of foreign countries involved in cross-border insolvency cases.
Establish greater legal certainty for trade and investment.
Provide for fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested parties.
Afford protection and maximization of the value of the debtor’s assets.
Facilitate the rescue of financially troubled businesses, to protect investments and preserve employment.
Usually, a Chapter 15 case is ancillary to a primary proceeding started in another country, typically the debtor’s home country. As an alternative, the debtor can file a Chapter 7 or Chapter 11 in the U.S. if the assets in the U.S. meet the requirements necessary to file.
With a Chapter 15 the bankruptcy court may authorize a trustee to act in a foreign country on behalf of the U.S. Also, it gives foreign creditors the right to participate in U.S. bankruptcies cases as well as prohibits discrimination against foreign creditors. The UNCITRAL Model Law has also been adopted in Canada, Mexico, Japan and several other countries. It is pending in the United Kingdom and Australia.
Margaret Norton, a Personal Life Coach/Writer/Speaker, resides in St. Peters, Mo.
Chapter 11 bankruptcy is sometimes referred to as “reorganization.” It usually involves a partnership or corporation. The debtor presents a repayment plan to the bankruptcy court. If it’s approved, the business is able to stay open, which is usually better for the creditors and everyone involved.
Like other types of bankruptcy, Chapter 11 is initiated when the debtor files a petition with a federal court. The petition can be voluntary or involuntary. The debtor must provide all information pertaining to assets, liabilities, income, expenditures, contracts and leases, and financial statements. They must also prove they’ve been to an approved credit counseling agency in the past 60 days. The debtor receives protection from his creditors as soon as the petition is filed. They keep their possessions and control their assets while they prepare a reorganization plan. The type of corporation effects how the bankruptcy is handled.
A corporation is separate from its owners, the stockholders. The personal assets of the stockholders are not at risk. Their risk is limited to the amount of their investment. A sole proprietorship is the opposite. The owner or debtor invests their personal assets in the business. It’s difficult to separate personal from business. Typically there’s a personal (Chapter 7 or 13) and business bankruptcy.
Similar to corporations, partnerships exist separate from the partners. There are two types of partnerships: general and limited. With a limited partnership each partners risk is limited to the amount of their investment. But with a general partnership the partners have unlimited personal liability.
After the debtor presents a repayment plan to the bankruptcy judge, it can be confirmed, dismissed or converted to a Chapter 7 or 11. In some situations a trustee is appointed. In others the court allows a representative of the company to handle the case. Creditors are notified and can attend the hearing. The debtor must answer questions under oath about their debt. A Chapter 11 bankruptcy is more complicated than Chapter 7 or 13. There’s more work, more people involved, more deadlines, more paperwork and more possible outcomes.
Legal advice is recommended when filing a Chapter 11. Creditors are classified as secured, unsecured, general unsecured and equity security. This determines in what order and how much they are paid back.Certain debts, like child support, taxes, education loans, legal payments resulting from law suits, etc., are excluded from the bankruptcy. Once the debtor has paid off all debt agreed to in the reorganization plan the bankruptcy is discharged. Bankruptcy definitely affects your credit. Afterward it takes time to improve your credit score. Bankruptcy can be a good decision. It gives a debtor the opportunity to start over. The best thing to do if you have to file bankruptcy is to make sure all payments after the bankruptcy are made on time.
Margaret Norton is a Person Life Coach/Writer/Speaker who resides in St. Peters, Mo.
Chapter 9 bankruptcies are unfamiliar to many of us. Designed for financially distressed municipalities, many individuals mistakenly think Chapter 9 doesn’t affect them. But it could. In the 60 years that this type of bankruptcy protection has been available, only a little over 500 petitions have been filed. The best-known case was probably Orange County, Calif., in 1994.
Chapter 9 is different from other types of bankruptcy in that there’s no provision for liquidation of the assets and the trustee has less power. Only a municipality may file a Chapter 9. Bankruptcy Code defines a municipality as a “political subdivision, public agency or instrumentality of a State.
” This can include cities, counties, townships, school districts and public improvement districts. Revenue-producing bodies such as bridge authorities, highway authorities and gas authorities also qualify.In addition to being a municipality, the following four requirements must be met:the municipality must be specifically authorized to be a debtor by state law or by a government officer the municipality must be insolvent the municipality must have the desire to create a plan to adjust its debts the municipality must either:
obtain the agreement of at least a majority of their creditors
negotiate in good faith with creditors and fail to obtain the agreement of creditors
be unable to negotiate with creditors because such negotiation is impracticable
or reasonably believe that a creditor may attempt to obtain a preference.
The municipality must voluntarily seek bankruptcy protection. Once a petition is filed they are granted protection from their creditors. They are obligated to notify all creditors and make public announcements regarding their intention to file bankruptcy. A trustee is appointed but most decisions are made by a creditors committee. The municipality proposes a debt restructure plan. The court has strict guidelines the municipality must meet. If these guidelines are met and the court determines the proposed plan is in the best interests of the creditors, it is approved by the court.
Approving the plan allows a municipality to continue operating with little or no disruption in service. It’s usually a win-win situation for everyone involved.
Margaret Norton, a Personal Life Coach/Writer/Speaker, resides in St. Peters, Mo.
Chapter 9 bankruptcies
Loading ...
