Debtors’ limited financial ties to the United States sufficient to satisfy eligibility requirements under Section 109

In the face of financial difficulties or a creditor seeking recourse against a company’s assets, there are significant advantages to filing a Chapter 11 lawsuit under the United States Bankruptcy Code, regardless of location in the world where the debtor company is headquartered or does business. Among these advantages are the global scope of the automatic stay under 11 USC Section 362(a), the ability of management to retain control of the debtor company for the duration of the bankruptcy filing, and the absence of insolvency requirement. Accordingly, the eligibility requirements for becoming a debtor under the Bankruptcy Code are of great interest to struggling foreign companies.

A recent ruling by the US Bankruptcy Court for the Southern District of New York is a reminder of how minimal US ties should be for foreign debtors. In In re JPA No. 111, no. 21-12075, 2022 Bankr. LEXIS 259 ​​(Bankr. SDNY Feb. 1, 2022), the bankruptcy court denied a motion to dismiss two bankruptcy cases filed by Japanese single-purpose entities, finding that a right of reversion on installments filed with the debtors’ US bankruptcy attorney satisfied the requirement that the debtors have “assets” in the United States.

Facts