Whether a foreign bankruptcy case can be recognized under chapter 15 if the foreign debtor does not satisfy the commands of both section 109 (of chapter 1) and section 1517 (of chapter 15) of the Bankruptcy Code has long been a contentious issue. As previewed at an oral argument held on March 10, 2023, the Eleventh Circuit has now waded into this thicket, setting up the possibility of a circuit-level counterweight to the Second Circuit’s seminal decision in In re Barnet.

Statutory Text

Appearing in chapter 1 of the Bankruptcy Code, section 109(a) states that “only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title,” i.e. the entire Bankruptcy Code.

But what about an entity seeking the refuge afforded by chapter 15, the part of Bankruptcy Code exclusively devoted to cross-border proceedings and foreign debtors?

This question implicates two provisions.

First, section 103(a) makes “all of [c]hapter 1,” which includes section 109(a), “applicable in [c]hapter 15.”

Second, per section 1517, a U.S. bankruptcy court “shall” enter an order recognizing a foreign proceeding so long as: (1) “such foreign proceeding for which recognition is sought is a foreign main proceeding or foreign nonmain proceeding within the meaning of section 1502”; (2) “the foreign representative applying for recognition is a person or body”; and (3) the petition for recognition meets section 1515’s requirements.

Divided Precedent

In In re Barnet, the Second Circuit decided that both section 109 and section 1517 bear on a foreign debtor’s chapter 15 eligibility. In other words, it ruled that the former provision, which requires U.S. residency, assets, or a place of business, applies in chapter 15 cases as well as cases filed under other chapters.

Dissent has followed. Less than one week later, Delaware’s U.S. Bankruptcy Court said the opposite in In re Bemarmara Consulting a.s., No. 13-13037-KG (Bankr. D. Del.). Years later, like the bankruptcy court, the U.S. District Court for the Middle District of Florida similarly concluded in In re Talas Qais Abdulmunem Al Zawawi, 637 B.R. 663 (M.D. Fla. 2022).

This was the decision whose merits will now be the subject of a future opinion from the Eleventh Circuit.