06 Sep Chapter 15 Bankruptcy. CHAPTER 15???
Most people are familiar with Chapter 7 and Chapter 13 bankruptcies. Many know that corporations file Chapter 11’s. But there are three other chapters of the Bankruptcy Code that very few people are familiar with—Chapters 9, 12 and 15.
Chapter 12 is a special section that deals with bankruptcies by family farmers. Covered are not only traditional farms, but fishermen and more exotic businesses—I once filed a Chapter 12 for someone who raised llamas for sale. A Chapter 12 is similar to a cross between a Chapter 11 and a Chapter 13, but has provisions that make it a better option for farmers. It is more streamlined, less complicated, and less expensive than Chapter 11, which is better suited to large corporate reorganizations. And it has more flexibility and higher debt limits than Chapter 13. It’s a reorganization that gives farmers an opportunity to get back on their feet, reduce some debt, and pay back debt over time.
Chapter 9 is the Chapter that is used the least. If applies only to cities and municipalities who run into serious financial difficulty, and has been used very rarely. As a reorganization Chapter, debt maturities can be extended, principal and interest can be reduced, and debt can be refinanced by obtaining a new loan. Interestingly, there is no provision for the sale of municipal assets or their distribution to creditors, as this would run afoul of the Tenth Amendment to the Constitution. See Ashton v. Cameron County Water Improvement Dist. No. 1, 298 U.S. 513 (1936) (holding the first Municipal Bankruptcy Act unconstitutional) and United States v. Bekins, 304 U.S. 27 (1938) (upholding the second Municipal Bankruptcy Act).
Chapter 15 is the newest Chapter of the Bankruptcy Code. It took effect October 17, 2005, and is the U.S. version of the Model Law on Cross-Border Insolvency adopted by the United Nations Commission on International Trade Law (“UNCITRAL”) in 1997. Because Chapter 15 is based on the UNCITRAL, U.S. interpretation must be coordinated with the interpretation given by other countries that have adopted it to promote a uniform and coordinated legal regime for cross-border insolvency cases.
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