By Corinne Ball, Dan Moss, Ben Rosenblum and David Torborg (Jones Day)
As Chapter 15 of the Bankruptcy Code marks its twentieth year, filings and jurisprudence have grown substantially. Yet a central threshold question continues to divide courts: must a foreign debtor satisfy the general debtor-eligibility requirement in section 109(a) of the U.S. Bankruptcy Code—residence, domicile, place of business, or “property in the United States”—to obtain Chapter 15 recognition? The Second Circuit says yes; the Eleventh Circuit says no. A recent decision from the Southern District of New York, In re B.C.I. Finances Pty Limited, reaffirms the Second Circuit’s approach and explains why Chapter 15 was designed for relatively “easy access,” even if the property nexus is minimal.
The Legal Backdrop: Chapter 15’s Structure and Purpose
Enacted in 2005 and modeled on UNCITRAL’s Model Law on Cross-Border Insolvency, Chapter 15 provides a framework for recognizing foreign insolvency proceedings and coordinating relief in the United States. Section 1501 articulates core objectives: cross-border cooperation, legal certainty, efficient administration that protects stakeholder interests, asset maximization, and rehabilitation where appropriate. Section 1508 instructs U.S. courts to interpret Chapter 15 with its international origins in mind and to promote consistency with analogous statutes in other countries that adopted the Model Law.
Mechanically, a “foreign representative” petitions for recognition under section 1515 of a qualifying “foreign proceeding” as defined in section 101(23). Recognition as a foreign “main” proceeding turns on the debtor’s center of main interests; recognition as “nonmain” turns on the debtor’s “establishment.” Recognition of a main proceeding triggers automatic consequences, including the automatic stay, limitations on transfers, and adequate protection (section 1520). In addition, section 1521 authorizes wide-ranging discretionary relief, such as stays, discovery related to assets and liabilities, and trustee-like remedies. Section 1507 allows “additional assistance,” guided by comity and safeguards for fair treatment, distribution priorities, and protection against avoidance harms. Section 1522 conditions relief on “sufficient protection” of stakeholders, and section 1506 preserves a narrow public policy exception to recognizing the non-U.S. proceeding.
Against that framework sits the definitional architecture of Chapter 11 of the U.S. Bankruptcy Code. Chapter 15 supplies its own “debtor” concept for Chapter 15 purposes (section 1502), but Chapter 11’s general definitions and eligibility rules—most notably section 109(a)—also apply in Chapter 15 via section 103(a). That cross-reference is at the heart of the current split.
The Split Emerges: Second Circuit’s Barnet vs. Eleventh Circuit’s Al Zawawi
In Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet) (2d Cir. 2013), the Second Circuit held that section 109(a) applies to Chapter 15 cases. The court reasoned that section 103(a) explicitly makes the provisions of Chapter 1 of the Bankruptcy Code applicable in Chapter 15, that Chapter 15 repeatedly refers to “debtors” in ways that logically tie to Title 11 definitions, and that nothing in the Model Law’s flexibility or the venue statute (28 U.S.C. § 1410) displaces the clear eligibility command of section 109(a). At the same time, district and bankruptcy courts in the Second Circuit have interpreted section 109(a)’s “property in the United States” prong very broadly—often satisfied by law firm retainers, U.S.-law claims, or rights under New York law debt instruments.
Outside the Second Circuit, several courts have rejected Barnet. Most notably, in In re Al Zawawi (11th Cir. 2024), the Eleventh Circuit concluded that Chapter 15 contains its own eligibility regime and that section 109(a) does not extend to Chapter 15 recognition. Earlier decisions in Delaware and Florida echo that reading, focusing on Chapter 15’s emphasis on recognition of proceedings (rather than the debtor) and the foreign representative’s status as the petitioner.
SDNY’s Recent Word: In re B.C.I. Finances
In In re B.C.I. Finances Pty Limited (Bankr. S.D.N.Y. 2025), Judge Philip Bentley addressed a challenge to the Barnet line of cases in the context of the Binetter Companies’ Australian liquidations. The foreign representative sought recognition primarily to obtain U.S. discovery regarding assets and potential claims tied to a decades-long tax evasion scheme. As with earlier Binetter filings, the debtor had funded a retainer in a New York bank shortly before the petition.
Objectors argued that importing section 109(a) into Chapter 15, and then allowing an attorney retainer to satisfy the “property” requirement, renders eligibility trivially easy and invites manipulation. The court disagreed, reaffirming three core points:
The text of section 103(a) unambiguously applies Chapter 1, including section 109(a), to Chapter 15 cases. Because the statute is clear, canons aimed at avoiding surplusage do not justify re-writing the eligibility standard.
Section 109(a) contains no qualifiers limiting the amount, timing, or character of “property in the United States.” Courts therefore should not fabricate thresholds or timing rules Congress did not enact.
Chapter 15’s purposes plausibly support relatively easy access. Recognition can be critical to halt collection activity, facilitate discovery about U.S. assets and claims, and coordinate with foreign proceedings—particularly where the foreign estate confronts U.S. actors or assets.
Importantly, the court emphasized that “easy access” does not mean “uncontrolled access.” Chapter 15 contains robust tools to check abuse. Post-recognition, courts may abstain or suspend proceedings where comity and efficiency would be better served (section 305), must condition relief on sufficient creditor and interested party protection (section 1522), and may grant relief only as necessary to effectuate Chapter 15’s purposes and protect assets or creditor interests (section 1521). Further, if recognition is denied, section 1509(d) authorizes orders preventing foreign representatives from obtaining comity elsewhere. In other words, the gate may be wide, but there are guardrails inside.
The court also underscored a practical point: without recognition, section 1509 channels would restrict a foreign representative’s ability to obtain federal or state court assistance in the United States.
Having found the Chapter 15 prerequisites met and the section 109(a) “property” requirement satisfied by the retainer, the court granted recognition and related relief.
How Much “Property” Is Enough?
Barnet itself left unanswered how much U.S. property suffices. On remand, In re Octaviar Administration Pty Ltd. (Bankr. S.D.N.Y. 2014), adopted a broad, practical approach, finding eligibility satisfied by U.S.-law causes of action and an undrawn U.S. retainer. Subsequent Southern District of New York decisions have followed suit, identifying small retainers, contractual rights governed by New York law, partnership interests, counterclaims in New York litigation, and rights under New York indentures as adequate. B.C.I. Finances aligns with that consensus: a properly established attorney retainer account in a U.S. bank remains sufficient “property” for section 109(a) purposes.
Policy Considerations and Critiques
Prominent commentators have criticized Barnet as misconstruing Chapter 15’s focus on recognizing foreign proceedings rather than the debtor’s status under U.S. law and for failing to account for section 1508’s internationalist interpretive directive. Some also argue that section 109(a) applies only in limited Chapter 15 contexts, such as when a foreign representative leverages section 1511 to commence a “full” case under another chapter or when a foreign discharge is enforced domestically.
B.C.I. Finances does not delve into academic critiques but emphasizes statutory clarity and functional coherence: Congress expressly made Chapter 1 applicable in Chapter 15 and wrote section 109(a) without minimums, seasoning, or anti-manufacture limitations. If the outcome seems “toothless,” that is a policy choice for Congress, not a gap for courts to fill. Meanwhile, Chapter 15’s internal checks, together with public policy and comity limitations, enable courts to cabin abuse.
Practical Implications for Cross-Border Practitioners
For parties operating in or targeting the Second Circuit, the path remains clear: ensure some cognizable “property in the United States,” commonly through a U.S. retainer account or U.S.-law claims or rights, and satisfy the recognition criteria. Recognition opens the door to the automatic stay (in main proceedings), U.S. discovery, and targeted relief necessary to protect assets or creditor interests. Foreign representatives should also craft requests with “sufficient protection” and comity principles in mind, anticipating section 1522 conditions and tailoring relief to the case’s needs.
In Eleventh Circuit courts, the analysis begins differently. There, Chapter 15 eligibility is measured by Chapter 15’s own terms without a section 109(a) overlay. That distinction can materially affect strategy, forum selection, and timing, particularly where a debtor’s U.S. nexus is sparse or hotly contested. Parties facing parallel proceedings across circuits should be prepared for divergent outcomes and develop record support suited to each jurisdiction’s framework.
Outlook: The Road to Resolution
B.C.I. Finances does not extend Second Circuit law, but it does sharpen the rationale for “easy access” within Barnet’s framework and underscores the availability of post-recognition tools to police improvidence. The split with the Eleventh Circuit persists, heightening forum-choice dynamics in cross-border matters and inviting further appellate development. Given Chapter 15’s central role in managing U.S.-linked assets, discovery, and creditor actions within global restructurings and liquidations, this is not a peripheral skirmish. It is a threshold that influences whether, how, and where cross-border debtors can coordinate U.S. relief with foreign proceedings.
Whether the Supreme Court or Congress ultimately harmonizes the eligibility standard remains to be seen. Until then, practitioners should navigate with the maps at hand: Barnet and its progeny in the Second Circuit, Al Zawawi in the Eleventh, and a patchwork elsewhere, all while leveraging Chapter 15’s internal mechanisms to align relief with comity, protection, and the efficient administration of cross-border estates.
*The article was originally published by Lexis Practical Guidance.