Chapter 15: A sword and a shield

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The ruling: Chapter 15 Debtors can assert avoidance actions under state law
On March 23, 2017, the United States Bankruptcy Court for the Southern District of Florida, Miami Division, ruled that a foreign debtor could use Chapter 15 to assert “avoidance actions” in the US under state law (in this
case New York fraudulent conveyance statutes).

In 2010, the United States Fifth Circuit Court of Appeals similarly ruled that a foreign debtor could use Chapter 15 to assert “avoidance actions” in the US based on foreign law. My article in the International Committee Newsletter of the American Bankruptcy Institute (“ABI”) dated November 2011 discusses the Fifth Circuit case, Condor Insurance Ltd., in detail. By contrast, the statutory language of Chapter 15 is clear that foreign debtors cannot assert “avoidance actions” based on the provisions set forth in the US Bankruptcy
Code, specifically including Sections 547 (preferences) and 548 (fraudulent conveyances).

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