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Both propose to remove the ability to "forum shop" by omitting a debtor's location of incorporation from the place analysis, andalarming to global debtorsexcluding cash or cash equivalents from the "principal possessions" formula. Additionally, any equity interest in an affiliate will be deemed situated in the same location as the principal.

Typically, this statement has actually been focused on questionable third celebration release provisions implemented in recent mass tort cases such as Purdue Pharma, Young Boy Scouts of America, and lots of Catholic diocese personal bankruptcies. These provisions regularly force creditors to launch non-debtor 3rd parties as part of the debtor's strategy of reorganization, even though such releases are probably not permitted, at least in some circuits, by the Personal bankruptcy Code.

In effort to stamp out this behavior, the proposed legislation claims to restrict "online forum shopping" by forbiding entities from filing in any place except where their home office or primary physical assetsexcluding money and equity interestsare located. Ostensibly, these expenses would promote the filing of Chapter 11 cases in other US districts, and guide cases away from the favored courts in New York, Delaware and Texas.

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Despite their admirable purpose, these proposed modifications might have unforeseen and potentially negative repercussions when viewed from a worldwide restructuring prospective. While congressional statement and other analysts assume that venue reform would simply ensure that domestic business would file in a various jurisdiction within the United States, it is a distinct possibility that worldwide debtors might hand down the United States Insolvency Courts entirely.

Without the consideration of money accounts as an opportunity towards eligibility, many foreign corporations without tangible assets in the United States may not certify to file a Chapter 11 bankruptcy in any United States jurisdiction. Second, even if they do qualify, worldwide debtors might not be able to depend on access to the normal and convenient reorganization friendly jurisdictions.

Given the complex issues regularly at play in an international restructuring case, this may trigger the debtor and creditors some unpredictability. This uncertainty, in turn, may encourage global debtors to file in their own nations, or in other more useful countries, rather. Especially, this proposed venue reform comes at a time when lots of nations are emulating the US and revamping their own restructuring laws.

In a departure from their previous restructuring system which emphasized liquidation, the new Code's objective is to reorganize and maintain the entity as a going issue. Thus, debt restructuring agreements might be approved with just 30 percent approval from the overall debt. Unlike the US, Italy's new Code will not include an automatic stay of enforcement actions by creditors.

In February of 2021, a Canadian court extended the nation's approval of 3rd party release arrangements. In Canada, businesses usually rearrange under the standard insolvency statutes of the Companies' Financial Institutions Arrangement Act (). 3rd celebration releases under the CCAAwhile fiercely objected to in the USare a common element of restructuring strategies.

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The recent court decision makes clear, though, that in spite of the CBCA's more restricted nature, 3rd party release provisions may still be acceptable. Companies might still get themselves of a less cumbersome restructuring available under the CBCA, while still receiving the benefits of 3rd party releases. Reliable since January 1, 2021, the Dutch Act on Court Confirmation of Extrajudicial Restructuring Plans has actually created a debtor-in-possession procedure carried out outside of formal bankruptcy proceedings.

Effective as of January 1, 2021, Germany's brand-new Act on the Stabilization and Restructuring Framework for Businesses supplies for pre-insolvency restructuring proceedings. Prior to its enactment, German business had no choice to restructure their debts through the courts. Now, distressed companies can hire German courts to reorganize their debts and otherwise protect the going concern value of their organization by utilizing a lot of the exact same tools offered in the US, such as maintaining control of their company, enforcing cram down restructuring plans, and implementing collection moratoriums.

Inspired by Chapter 11 of the United States Bankruptcy Code, this new structure streamlines the debtor-in-possession restructuring procedure largely in effort to help small and medium sized companies. While previous law was long slammed as too pricey and too complicated due to the fact that of its "one size fits all" method, this new legislation integrates the debtor in ownership model, and offers for a streamlined liquidation procedure when essential In June 2020, the UK enacted the Corporate Insolvency and Governance Act of 2020 ().

Shielding Your Income From Debt Harassment

Notably, CIGA supplies for a collection moratorium, revokes particular provisions of pre-insolvency contracts, and allows entities to propose a plan with investors and creditors, all of which allows the formation of a cram-down plan similar to what might be achieved under Chapter 11 of the US Insolvency Code. In 2017, Singapore adopted enacted the Companies (Amendment) Act 2017 (Singapore), that made major legislative modifications to the restructuring arrangements of the Singapore Companies Act (Cap 50) 2006.

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As an outcome, the law has actually substantially improved the restructuring tools offered 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 Bankruptcy Code, which totally overhauled the bankruptcy laws in India. This legislation seeks to incentivize more investment in the nation by providing greater certainty and effectiveness to the restructuring procedure.

Given these current changes, international debtors now have more choices than ever. Even without the proposed constraints on eligibility, foreign entities may less need to flock to the US as previously. Even more, need to the US' location laws be changed to prevent simple filings in certain convenient and beneficial venues, global debtors might start to consider other places.

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

Steps to Petition for Chapter 7 in 2026

Consumer bankruptcy filings rose 9% in January 2026 compared to January 2025, with 44,282 customer filings that month alone. Industrial filings jumped 49% year-over-year the highest January level given that 2018. The numbers show what debt experts call "slow-burn monetary strain" that's been building for many years. If you're struggling, you're not an outlier.

Customer insolvency filings totaled 44,282 in January 2026, up 9% from January 2025. Business filings hit 1,378 a 49% year-over-year jump and the highest January commercial filing level since 2018. For all of 2025, customer filings grew almost 14%.