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Both propose to get rid of the capability to "forum store" by leaving out a debtor's location of incorporation from the location analysis, andalarming to international debtorsexcluding money or cash equivalents from the "principal properties" formula. In addition, any equity interest in an affiliate will be considered located in the exact same location as the principal.

Usually, this testimony has been focused on questionable third party release arrangements executed in current mass tort cases such as Purdue Pharma, Kid Scouts of America, and many Catholic diocese insolvencies. These arrangements regularly require financial institutions to release non-debtor 3rd parties as part of the debtor's plan of reorganization, although such releases are arguably not allowed, at least in some circuits, by the Insolvency Code.

In effort to stamp out this behavior, the proposed legislation claims to limit "forum shopping" by restricting entities from filing in any location except where their business headquarters or principal physical assetsexcluding money and equity interestsare situated. Ostensibly, these expenses would promote the filing of Chapter 11 cases in other United States districts, and steer cases away from the favored courts in New York, Delaware and Texas.

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In spite of their admirable function, these proposed modifications could have unforeseen and possibly adverse repercussions when seen from an international restructuring potential. While congressional testimony and other commentators assume that location reform would simply ensure that domestic business would file in a different jurisdiction within the United States, it is an unique possibility that global debtors may pass on the United States Insolvency Courts altogether.

Without the factor to consider of money accounts as an opportunity toward eligibility, lots of foreign corporations without concrete possessions in the United States may not qualify to submit a Chapter 11 personal bankruptcy in any US jurisdiction. Second, even if they do qualify, international debtors might not be able to depend on access to the typical and convenient reorganization friendly jurisdictions.

Offered the intricate concerns often at play in an international restructuring case, this might cause the debtor and financial institutions some unpredictability. This unpredictability, in turn, might motivate worldwide debtors to submit in their own nations, or in other more helpful countries, instead. Notably, this proposed venue reform comes at a time when many countries are imitating the US and revamping their own restructuring laws.

In a departure from their previous restructuring system which highlighted liquidation, the new Code's objective is to reorganize and preserve the entity as a going concern. Hence, financial obligation restructuring arrangements may be authorized with just 30 percent approval from the overall debt. However, unlike the US, Italy's new Code will not feature an automated stay of enforcement actions by lenders.

In February of 2021, a Canadian court extended the country's approval of 3rd party release provisions. In Canada, services normally restructure under the standard insolvency statutes of the Companies' Financial Institutions Plan Act (). 3rd party releases under the CCAAwhile fiercely contested in the USare a typical element of restructuring strategies.

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The current court choice explains, though, that regardless of the CBCA's more minimal nature, 3rd party release arrangements might still be appropriate. For that reason, business might still get themselves of a less cumbersome restructuring readily available under the CBCA, while still receiving the benefits of 3rd party releases. Reliable since January 1, 2021, the Dutch Act Upon Court Confirmation of Extrajudicial Restructuring Plans has actually developed a debtor-in-possession treatment carried out beyond official bankruptcy procedures.

Effective as of January 1, 2021, Germany's brand-new Act upon the Stabilization and Restructuring Framework for Organizations offers pre-insolvency restructuring procedures. Prior to its enactment, German companies had no choice to reorganize their debts through the courts. Now, distressed business can hire German courts to reorganize their financial obligations and otherwise protect the going concern value of their company by utilizing much of the very same tools available in the United States, such as keeping control of their business, enforcing pack down restructuring plans, and carrying out collection moratoriums.

Motivated by Chapter 11 of the US Bankruptcy Code, this new structure streamlines the debtor-in-possession restructuring procedure mainly in effort to assist small and medium sized businesses. While previous law was long slammed as too pricey and too complex since of its "one size fits all" technique, this new legislation integrates the debtor in ownership model, and offers a streamlined liquidation procedure when required In June 2020, the UK enacted the Corporate Insolvency and Governance Act of 2020 ().

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Notably, CIGA provides for a collection moratorium, revokes certain arrangements of pre-insolvency agreements, and permits entities to propose an arrangement with shareholders and lenders, all of which allows the development of a cram-down strategy similar to what may be accomplished under Chapter 11 of the United States Bankruptcy Code. In 2017, Singapore adopted enacted the Companies (Amendment) Act 2017 (Singapore), which made significant legislative changes to the restructuring provisions of the Singapore Companies Act (Cap 50) 2006.

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As a result, the law has substantially improved the restructuring tools available in Singapore courts and moved Singapore as a leading hub for insolvency in the Asia-Pacific. In May of 2016, India enacted the Insolvency and Insolvency Code, which totally overhauled the bankruptcy laws in India. This legislation looks for to incentivize further investment in the country by supplying greater certainty and effectiveness to the restructuring procedure.

Provided these current modifications, international debtors now have more options than ever. Even without the proposed limitations on eligibility, foreign entities might less need to flock to the United States as in the past. Even more, must the US' venue laws be modified to avoid simple filings in particular hassle-free and useful locations, global debtors might begin to think about other places.

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Special thanks to Dallas partner Michael Berthiaume who prepared and authored this material under the supervision of Rebecca Winthrop, Of Counsel in our Los Angeles office.

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Commercial filings jumped 49% year-over-year the greatest January level because 2018. The numbers show what debt experts call "slow-burn financial strain" that's been constructing for years.

Consumer insolvency filings amounted to 44,282 in January 2026, up 9% from January 2025. Commercial filings hit 1,378 a 49% year-over-year dive and the greatest January industrial filing level considering that 2018. For all of 2025, consumer filings grew nearly 14%.