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One of the newest forms of bankruptcy is known as Chapter 15 bankruptcy. Chapter 15 was added to the U.S. Bankruptcy Code in 2005 and it has come to recent media exposure thanks to a virtual currency known as Bitcoin.
Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, President George W. Bush signed into law several changes that were made to the Bankruptcy Code, including changes to the means test for individuals filing for either Chapter 7 or Chapter 13 bankruptcy, as well as oversight for small businesses filing for Chapter 11 protections. The biggest change was the introduction of Chapter 15, which is based on international law through the United Nations (United Nations Commission on International Trade Law, or UNCITRAL).
Chapter 15 has received notice recently as a Bitcoin exchange known as Mt. Gox, which is based in Tokyo, Japan, filed for bankruptcy protection in both Japan and in the United States under Chapter 15 bankruptcy. In February 2014, the Mt. Gox exchange was the victim of a cyber attack that led to losses of 850,000 bitcoins, which was estimated at a value of $473 million US. For its Japanese filing, Mt. Gox has claimed liabilities of ¥6.5 million (JPY). In order to protect itself in the United States against any bitcoin traders who might take legal action, Mt. Gox applied for Chapter 15 protection.
Chapter 15 not only serves to promote cooperation between the United States Bankruptcy Court and Japan, but also to ensure that the value of the assets is protected and to provide a way for a financially troubled business to be rescued (if possible). Chapter 15 bankruptcy isn't the main instrument for a foreign company like Mt. Gox; the primary bankruptcy proceedings will take place in Japan under either their Corporation Reorganization Law or Civil Rehabilitation Law.
This form of bankruptcy is only applicable to insolvency cases that involve more than one country. In the Mt. Gox example, the primary proceedings will take place in Japan, as that is the company's home country; ancillary or additional proceedings may take place in the United States since creditors and traders in the U.S. are affected by the insolvency.
Another aspect of Chapter 15 bankruptcy is that a U.S. court can appoint someone to act on behalf of the United States' interests in a bankruptcy action filed in a foreign country.
If you'd like to read more about the different forms of bankruptcy mentioned above, or on other types of bankruptcy, we have information available on:
- Chapter 7 (this means it's a liquidation of your assets);
- Chapter 9 (a bankruptcy used by municipalities like cities and towns);
- Chapter 11 (this is considered the most common business bankruptcy) or
- Chapter 13 (the form of bankruptcy where your finances are reorganized);
Bankruptcy can be a complicated process, for both companies and individuals. Even the types of bankruptcy that most people think of when it comes to personal finance - Chapter 7 or Chapter 13 - can also be used by businesses. If you've found yourself in a situation where you're thinking about filing for bankruptcy, AmOne is here to help you find alternatives. To learn about what options may be available to you, fill out our online debt solutions form or call us toll-free at 1-800-781-5187 to speak with one of our financial search specialists.
AmOne is open Monday through Friday from 9:00 AM to 9:00 PM and on Saturday from 9:00 AM to 5:00 PM Eastern time. Our free service helps you to find ideal options for your debt situation so you don't have to file for bankruptcy protection.