Vol 21 (2024) - Issue 5

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Eleventh Circuit Rules Having a Domicile, Place of Business, or Property in the United States is not a Prerequisite for Chapter 15 Recognition

Synopsis
In 2013, the United States Court of Appeals for the Second Circuit ('Second Circuit') ruled that in order to
be eligible for chapter 15 recognition, a foreign debtor had to satisfy section 109(a) of the Bankruptcy Code,
which provides that a debtor must 'reside[] or [have] a domicile, a place of business, or property in the United
States' as of the petition date. While the decision limited the universe of entities eligible for chapter 15 relief, it did not significantly deter foreign debtors from filing chapter 15 cases in the Second Circuit (which includes New York) as courts generally find minimal property to satisfy the property requirement of section 109(a) of the Bankruptcy Code.
The same question was recently presented to the United States Court of Appeals for the Eleventh Circuit ('Eleventh Circuit'), which determined that the plain language of the Bankruptcy Code mandated the same result – i.e., that a foreign debtor had to reside or have a domicile, place of business, or property in the United States to be eligible for chapter 15. However, the Eleventh Circuit concluded that it was bound by Circuit precedent (which is binding until overruled by the same court en banc or by the Supreme Court) that refused to apply the eligibility requirements under Chapter 1 of the Bankruptcy Code, including section 109(a), to ancillary assistance under the statutory predecessor to chapter 15, former section 304 of the Bankruptcy Code. By so ruling, the Eleventh Circuit created a circuit split and arguably made its courts more favourable (and potentially more attractive) to prospective chapter 15 debtors.