08 Oct Filing for Bankruptcy From Outside the United States
Can you file for bankruptcy in the United States if you live in Canada…or England…or Costa Rica? The answer, at least in Maryland, is “Yes.”
A recent decision by Maryland Bankruptcy Judge Nancy Alquist in a case I argued, In re Baker, held that Mr. Baker, a US citizen who was a resident of Costa Rica, could file in Maryland. This was so even though his only tie to Maryland was a $100 bank account opened for the purpose of giving the Maryland Court venue over his case. Why did Judge Alquist reach her conclusion and why is this case important?
Mr. Baker’s case was a “no asset Chapter 7.” This is a type of Chapter 7 case where either there is no equity in the debtor’s assets, or all of the assets are exempt. And his case would have been a no-asset Chapter 7 regardless of which state the case would have been filed in. In other words, it didn’t matter which state Mr. Baker filed in or which state’s exemptions were used, his creditors would not receive anything and all of his debts would be discharged.
Judge Alquist held that 28 USC § 1408, which governs venue in bankruptcy cases, governed. This statute states:
“[A] case under title 11 may be commenced in the district court for the district…in which the…principal assets in the United States, of the person or entity that is the subject of such case have been located for the one hundred and eighty days immediately preceding such commencement, or for a longer portion of such one hundred and eighty day period….”
Although the US Trustee argued that the $100 bank account was too tenuous a connection with Maryland to allow venue, Judge Alquist noted that § 1408 contains no minimum amount that must be present in the US, so long as it was the debtor’s “principal asset” for the 180 days before the case was filed. As she stated, “This statute does not contain any quantification of the type of property that is sufficient, and one court has held that ‘a dollar, a dime or a peppercorn’ located in the United States will suffice. In re McTague, 198 B.R. 428, 432 (Bankr. W.D.N.Y. 1996).”
In denying the US Trustee’s Motion to Dismiss, Judge Alquist noted the fundamental entitlement of a debtor to file for bankruptcy, stating:
“Having the right to file for bankruptcy protection, is Mr. Baker to be denied a remedy based on venue? The Court does not believe that this result comports with notions of justice or with a fair and plain reading of the venue statute.”
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