The threshold for commencing a case under chapter 11 of the US Bankruptcy Code is relatively low, so jurisdiction can be established if the debtor’s domicile, residence, principal place of business or principal assets is in the US. Non-US practitioners are often surprised to learn that the mere presence of assets (eg a US bank account) may suffice. For more information, see Practice Note: US Chapter 11 proceedings.
The debtor may wish to choose a particular state within the US (eg New York, Texas or Delaware) to file in based on various factors, including the location of key stakeholders, local court experience and different binding precedents on certain legal issues.
Certain entities may not file for chapter 11 relief, including insurance companies and banks.
If the business cannot be saved, it may choose to liquidate under chapter 7 (orderly liquidation may also be commenced under chapter 11). For more information, see Practice Note: US Chapter 7 liquidation.
Benefits of filing for chapter 11 protection include:
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