Property, Recognition, and the Problem of the term “Debtor”: Rethinking Eligibility in Chapter 15 Cross-Border Insolvency

Authors

• Jonathan Lent

First Page

463

Abstract

Congress knows how to draft a property requirement. There is no such requirement for a Chapter 15 debtor to seek recognition of its foreign proceeding, yet there is a circuit split on the issue. In 2005, Congress enacted Chapter 15 through the Bankruptcy Consumer Protection and Consumer Act (“BAPCPA”). The Second Circuit in In re Barnet held that section 109(a), along with its property requirement, applies in a Chapter 15 case through section 103(a), which provides that Chapter 1 of the bankruptcy code applies to Chapter 15. The Eleventh Circuit, in In re Al Zawawi, relying on jurisprudence decided under former section 304, held that there is sufficient ambiguity to look to the purpose of the statute, which was to prevent a race to the courthouse to protect creditors from dismemberment. Chapter 15 shares the same purpose as the former section 304, so why the fuss? Chapter 15, by Congress’s own admission, tracks the Model Law on Cross-Border Insolvency (the “Model Law”). The Model Law refers to the debtor subject to a foreign insolvency proceeding as “debtor.” Debtor is not defined in the Model Law or found in its definition section. The Model Law defines “foreign proceeding” using the word “debtor,” but it is clear that the drafters are referring to a debtor subject to a foreign proceeding whenever it uses the term. When Congress adopted the definition of “foreign proceeding,” it tracked the Model Law’s definition, but section 101 already contains a definition of “debtor” in section 101(13). Section 109(a) contains the requirements of “who may be a debtor,” which requires that a debtor, prior to filing, must have a “domicile, a place of business, or property in the United States.” However, Congress also added a definition of debtor in Chapter 15, which states that a “debtor” is an “entity subject to a foreign proceeding.” This creates an issue: Which definition of debtor applies, and does it matter? This note argues that Congress made a drafting error when implementing the Model Law in the Bankruptcy Code, and the way to resolve such an error is to transplant Chapter 15’s definition of “debtor” to section 101 while creating a carveout of such definition under 109(a). This would resolve the confusion about whether a foreign debtor must own property in the U.S. before filing a Chapter 15 petition. This matters because the Model Law’s purpose is to promote cooperation in cross-border insolvencies. While 109(a)’s property requirement prior to filing a Chapter 15 petition may only be a speedbump, it still frustrates the purpose of the Model Law, which is adverse to Congress’s intent when it adopted Chapter 15.

Recommended Citation

Jonathan Lent, Property, Recognition, and the Problem of the term “Debtor”: Rethinking Eligibility in Chapter 15 Cross-Border Insolvency, 20 Brook. J. Corp. Fin. & Com. L. 463 (2026).
Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol20/iss2/7