Chapter 15 petitions seeking recognition in the United States of foreign bankruptcy proceedings have increased significantly during the more than 16 years since chapter 15 was enacted in 2005. Among the relief commonly sought in such cases is discovery concerning the debtor's assets or asset transfers involving U.S.-based entities. A nonprecedential ruling recently handed down by the U.S. Court of Appeals for the Eleventh Circuit has created a circuit split on the issue of whether discovery orders entered by a U.S. bankruptcy court in a chapter 15 case are immediately appealable.

U.S. courts have a long-standing tradition of recognizing or enforcing the laws and court rulings of other nations as an exercise of international "comity." It has been generally understood that recognition of a foreign bankruptcy proceeding under chapter 15 is a prerequisite to a U.S. court enforcing, under the doctrine of comity, an order or judgment entered in a foreign bankruptcy proceeding or a provision in foreign bankruptcy law applicable to a debtor in such a proceeding.

In cases under both chapter 15 of the Bankruptcy Code and its repealed predecessor, section 304, U.S. bankruptcy courts have routinely recognized and enforced orders of foreign bankruptcy and insolvency courts as a matter of international comity. However, U.S. bankruptcy courts sometimes disagree over the precise statutory authority for granting such relief, because the provisions of chapter 15 are not particularly clear on this point in all cases.

On July 15, the U.S. Court of Appeals for the Second Circuit ruled that private student loans are not explicitly exempt from a debtor’s Chapter 7 bankruptcy discharge.

A bill introduced by Democratic U.S. senators looks to make it easier for Americans to discharge student loans and medical debt. If passed as currently written, the Medical Bankruptcy Fairness Act of 2021 would drastically change the U.S. bankruptcy system by removing certain procedural hurdles that make the bankruptcy process complex and by creating a clearer path to discharging debts that impact millions of Americans.

The EMEA Determinations Committee's recent bankruptcy determination involving Selecta CDS provides additional insight on the types of chapter 15 filings that are likely to trigger Credit Events.

On August 31, 2020, the Tenth Circuit affirmed the United States Bankruptcy Court for the District of Colorado’s holding that certain student loans not guaranteed by a governmental unit may be discharged in bankruptcy.

In Short

The Situation: On August 11, 2020, a Credit Derivatives Determinations Committee for EMEA ("DC") unanimously determined that the Chapter 15 filing by British retailer Matalan triggered a Bankruptcy Credit Event under standard credit default swaps ("CDS").

The Result: The DC's decision diverged from its only prior decision (involving Thomas Cook) on whether a Chapter 15 petition constituted a Bankruptcy Credit Event.

Earlier this month, in Davis v. Carrington Mortgage Services, LLC, et al., the United States District Court for the District of Nevada held that consumer reporting agencies are not obligated to determine the legal status of debts. The Court also reinforced the plausible pleading standard for Fair Credit Reporting Act cases, while providing an overview of CRAs’ obligations under the act.

On March 27, Minnesota Gov. Tim Walz clarified that Executive Order 20-20, which directed Minnesota residents to stay at home, applies to debt collection professionals. Due to ongoing coronavirus (“COVID-19”) concerns, Executive Order 20-20, which will remain in effect until April 10, 2020, orders all persons living in the State of Minnesota to stay at home except to engage in exempted activities and critical sector work.