12. RESTRUCTURING AND BANKRUPTCY CONSIDERATIONS Understanding the U.S. bankruptcy and restructuring framework is essential for foreign investors operating in the U.S. market. Bankruptcy law in the U.S. is governed at the federal level under the U.S. Bankruptcy Code (Title 11 of the U.S. Code), ensuring uniformity across all states. The U.S. has one of the most investor-friendly bankruptcy systems, offering structured ways for businesses to reorganize, liquidate, or restructure debt obligations while continuing operations or winding down in an orderly manner. Foreign investors must understand how U.S. laws apply to their assets, liabilities, and cross-border operations. The U.S. Bankruptcy Code provides several types of bankruptcy filings, each designed for specific circumstances: 12.1 Chapter 7 (Liquidation) Used primarily by individuals and businesses seeking to liquidate assets and discharge debts when restructuring is not viable. 12.2 Chapter 11 (Reorganization) Allows businesses to restructure debts and continue operating under court supervision while negotiating repayment plans with creditors. 12.3 Chapter 13 (Wage Earner’s Plan) Designed for individuals with regular income to reorganize debts into manageable repayment plans. 12.4 Chapter 15 (Cross-Border Insolvency) Facilitates cooperation between U.S. and foreign courts in cases involving international insolvency proceedings. By leveraging U.S. bankruptcy laws effectively, foreign investors can protect their business interests, restructure obligations, and potentially benefit from stronger debtor protections than in their home jurisdictions. Seeking legal guidance on cross-border insolvency strategies ensures compliance with both U.S. and international regulations. 12.5 Can Foreign Investors File for Bankruptcy or Restructuring in the U.S.? Yes, foreign investors and companies can file for bankruptcy or restructuring in the U.S. if they have assets, operations, or financial obligations within the country. (i) There is no strict residency or citizenship requirement to file for bankruptcy in the U.S.; however, the debtor must have a domicile, place of business, or assets in the country. The most common restructuring mechanism is Chapter 11 bankruptcy, which allows businesses to continue operations while restructuring debt under court supervision. (ii) Foreign investors can also file for Chapter 7 bankruptcy for full liquidation if they decide to exit the market entirely.
53
Made with FlippingBook Ebook Creator