Chapter 15 Relief: What Does It Take to Qualify?

In In re Barnet, 737 F.3d 238 (2d Cir. 2013), the Second Circuit held that the plain language of the Bankruptcy Code compels the conclusion that section 109(a) applies in chapter 15 cases because section 103 of the Bankruptcy Code makes chapter 1 of the Bankruptcy Code applicable in chapter 15 cases. It also emphasized that, as a result, applying section 109(a) in determining eligibility for recognition under chapter 15 reflected Congressional intent. Accordingly, in the Second Circuit, petitioners seeking recognition of a foreign proceeding must prove that the foreign debtor has a domicile, place of business or property in the United States to qualify for chapter 15 recognition.

The Eleventh Circuit reached a contrary result in In re Al Zawawi, 97 F.4th 1244 (11th Cir. 2024), holding that section 109(a) does not apply to chapter 15 cases and a foreign debtor thus does not need to have assets in the United States to obtain recognition. The Eleventh Circuit found it was bound by its prior decision in In re Goerg, 844 F.2d 1562 (11th Cir. 1988), where the court reached the same result under section 304 of the Bankruptcy Code, chapter 15’s predecessor. In that case, the Goerg court identified section 304’s purpose as preventing dismemberment of assets in the United States by local creditors and furthering the efficiency of foreign insolvency proceedings involving international assets. In light of section 304’s purpose, the court concluded that “it would make little sense to require that the subject of the foreign proceeding qualify as a ‘debtor’ under United States Bankruptcy law[.]” Still, the Eleventh Circuit in Al Zawawi acknowledged that the plain text of the Bankruptcy Code provided a contrary result, as held by the Second Circuit in Barnet. This plain language conundrum resulted in two concurring opinions. In the first concurrence, the judge indicated that, were she not bound by Eleventh Circuit precedent, she would have followed the Second Circuit’s approach and applied section 109(a)’s eligibility requirement to deny foreign recognition. In contrast, the judge filing the second concurrence emphasized that a strict reading would undercut chapter 15’s purpose of facilitating the efficient resolution of foreign insolvency proceedings, so he supported not applying section 109(a)’s eligibility requirements.

The Bankruptcy Court’s Decision in Venus Capital Management Company
Earlier this month, the Bankruptcy Court for the District of Rhode Island followed the Eleventh Circuit in holding that a debtor does not need to satisfy section 109(a) to qualify for chapter 15 relief. See In re Venus Capital Management, Case No. 25-10709 (Bankr. D.R.I. Mar. 2, 2026) [ECF No. 30].

The Venus debtors were a holding company, two master funds, and two feeder funds, three of which were in insolvency proceedings under Mauritian insolvency law and two of which were in insolvency proceedings under British Virgin Islands insolvency law. The debtors filed for chapter 15 relief to take advantage of the automatic stay and preclude further prosecution of certain legal actions against them.

The court granted the debtors’ request for recognition, and in a later-issued opinion analyzed whether section 109(a)’s eligibility requirements apply in chapter 15 cases. The court recognized the circuit split before adopting the Eleventh Circuit’s approach, relying heavily on the bankruptcy court’s (rather than the circuit court’s) opinion in Al Zawawi. The court found that a plain language reading of section 103(a) would render sections 1517 and 1528 of the Bankruptcy Code, as well as 28 U.S.C. § 1410 (a venue statute), meaningless for three reasons. First, section 1517(a) sets forth three conditions for recognition, none of which implicate a foreign debtor’s contacts with the United States. Second, under section 1528, after recognition of a foreign main proceeding, a debtor may only commence a case under another chapter if the debtor has assets in the United States. If assets were required for chapter 15 recognition, it would be unnecessary to clarify that domestic assets are needed to commence a case under another chapter. Third, and finally, venue is also appropriate if there is an action or proceeding pending against a debtor in the United States, or if venue is consistent with the interests of justice and convenience of the parties. If property was required for venue, it would render subsections (2) and (3) of section 1410 meaningless. The court also found that the Eleventh Circuit’s approach was consistent with congressional intent. Most importantly, the court recognized that, even if it had adopted the Second Circuit’s approach, the Venus debtors’ ownership of retainer accounts in the United States held by their chapter 15 counsel in Rhode Island was sufficient to satisfy section 109(a)’s property requirement.

Conclusion
Courts remain split over whether section 109(a)’s eligibility requirements apply in chapter 15 cases. As demonstrated in Venus Capital Management, though, the split may have little practical effect, as minimal assets, even a retainer account on deposit with the debtor’s U.S. lawyers, will generally satisfy section 109(a)’s requirements.

(This is another in our series of client alerts related to international and cross-border insolvency issues. Pillsbury previously covered the Eleventh Circuit’s decision in Al Zawawi in 2024.)