Third-Party Releases Through Chapter 15—Loophole or Comity?

Recent filings suggest that companies are leveraging recognition proceedings under Chapter 15 of the U.S. Bankruptcy Code to obtain relief they couldn’t achieve under foreign or U.S. bankruptcy law alone. Noteworthy decisions highlight a judicial openness—grounded in comity—to recognize foreign proceedings in the U.S. that include third-party releases. Japanese companies eyeing this path should weigh the potential benefits against the risks of perceived abuse.

  1. An Overview of Chapter 15 Proceedings

Chapter 15 facilitates cross-border insolvency cases by allowing foreign debtors to access U.S. bankruptcy protections through recognition of foreign proceedings.1 They are not standalone proceedings, but rather ancillary to foreign proceedings that enable U.S. courts to enforce foreign court orders and extend protections under U.S. bankruptcy or other law such as the automatic stay.2

To grant recognition, U.S. bankruptcy courts look for three requirements set forth in Section 1517 of the Bankruptcy Code: (1) the presence of a foreign main or foreign nonmain proceeding; (2) the foreign representative applying for recognition is a person or body; and (3) the petition is not manifestly contrary to public policy. These are evaluated formulaically, and Chapter 15 is usually granted.3

2. Emerging Trends

In Harrington v. Purdue Pharma L.P., the U.S. Supreme Court barred nonconsensual third-party releases under Chapter 11 of the Bankruptcy Code absent specific statutory authority. The ruling, however, did not address Chapter 15 or comity-based recognition—leaving space for U.S. courts to enforce foreign restructuring plans that include such releases—many of which still permit them.

That flexibility was underscored in In re Crédito Real, where a Mexican court-approved restructuring plan included nonconsensual third-party releases.4 The United States International Development Finance Corporation objected to Chapter 15 recognition of that plan on public-policy grounds, urging the application of Purdue.5 U.S. Bankruptcy Judge Horan disagreed, ruling that Chapter 15 prioritizes comity6 and that Bankruptcy Code section 1521(a)(7) provides broader authority than its Chapter 11 counterpart does.7 He further noted that Section 1506’s public-policy exception must be applied narrowly: only when a foreign judgment is manifestly contrary to U.S. principles.8

A similar ruling followed in In re Odebrecht. There, Judge Glenn recognized a Brazilian Court-approved restructuring plan under Chapter 15 despite objections from the United States Trustee.9 He distinguished Chapter 11 from Chapter 15, emphasizing comity, and agreed with Judge Horan’s rationale, noting §1521(a)(7) offers broader discretion than §1123(b)(6) in Chapter 11.

By contrast, In re Mega NewCo tested the limits of this deference to foreign plans under Chapter 15. The debtor was a newly formed and wholly owned subsidiary of a Mexican financial services company.10 The parent company did not dispute the fact that the subsidiary was incorporated in England for the sole purpose of restructuring.11 By initiating proceedings in the English Court, the parent company avoided complications that would have arisen under both Mexican and U.S. bankruptcy law. Judge Wiles granted recognition—but not without hesitation. He noted the subsidiary had no “regular market-facing activities” in England12 and suggested the outcome might differ if creditors had objected.13 This statement suggests that U.S. courts may draw the line for U.S. recognition where such tactical maneuvers suggest abuse, making recognition contrary to U.S. public policy and inappropriate under Chapter 15.

This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。

[1] 11 U.S.C. § 1525.

[2] Id. §§ 1520(a); 1509.

[3] In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 125 (Bankr. S.D.N.Y. 2007) (“The [Chapter 15] determination is a formulaic one.”).

[4] In re Crédito Real, S.A.B. de C.V., SOFOM, E.N.R., No. 25- 10208 (TMH), 2025 WL 977967 (Bankr. D. Del. Apr. 1, 2025).

[5] Id.

[6] Id. at *6.

[7] Id. at *10.

[8] Id. at *7.

[9] In re Odebrecht Engenharia e Construção S.A. – Em Recuperação Judicial, No. 25-10482 (MG), 2025 WL 1156607 (Bankr. S.D.N.Y. April 21, 2025).

[10] In re Mega Newco Ltd., No. 24-12031 (MEW), 2025 WL 601463 (Bankr. S.D.N.Y. Feb. 24, 2025).

[11] Id. at *3.

[12] Id. at *2.

[13] Id. at *4.

Footnotes

[1] 11 U.S.C. § 1525.

[2] Id. §§ 1520(a); 1509.

[3] In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 125 (Bankr. S.D.N.Y. 2007) (“The [Chapter 15] determination is a formulaic one.”).

[4] In re Crédito Real, S.A.B. de C.V., SOFOM, E.N.R., No. 25- 10208 (TMH), 2025 WL 977967 (Bankr. D. Del. Apr. 1, 2025).

[5] Id.

[6] Id. at *6.

[7] Id. at *10.

[8] Id. at *7.

[9] In re Odebrecht Engenharia e Construção S.A. – Em Recuperação Judicial, No. 25-10482 (MG), 2025 WL 1156607 (Bankr. S.D.N.Y. April 21, 2025).

[10] In re Mega Newco Ltd., No. 24-12031 (MEW), 2025 WL 601463 (Bankr. S.D.N.Y. Feb. 24, 2025).

[11] Id. at *3.

[12] Id. at *2.

[13] Id. at *4.

© 2026 Jenner & Block LLP. Attorney Advertising. Jenner & Block LLP is an Illinois Limited Liability Partnership including professional corporations. This publication, presentation, or event is not intended to provide legal advice but to provide information on legal matters and/or firm news of interest to our clients and colleagues. Readers or attendees should seek specific legal advice before taking any action with respect to matters mentioned in this publication or at this event. The attorney responsible for this communication is Brent E. Kidwell, Jenner & Block LLP, 353 N. Clark Street, Chicago, IL 60654-3456. Prior results do not guarantee a similar outcome. Jenner & Block London LLP, an affiliate of Jenner & Block LLP, is a limited liability partnership established under the laws of the State of Delaware, USA and is authorised and regulated by the Solicitors Regulation Authority with SRA number 615729. Information regarding the data we collect and the rights you have over your data can be found in our Privacy Notice. For further inquiries, please contact dataprotection@jenner.com.

Third-Party Releases Through Chapter 15—Loophole or Comity?

Recent filings suggest that companies are leveraging recognition proceedings under Chapter 15 of the U.S. Bankruptcy Code to obtain relief they couldn’t achieve under foreign or U.S. bankruptcy law alone. Noteworthy decisions highlight a judicial openness—grounded in comity—to recognize foreign proceedings in the U.S. that include third-party releases. Japanese companies eyeing this path should weigh the potential benefits against the risks of perceived abuse.

  1. An Overview of Chapter 15 Proceedings

Chapter 15 facilitates cross-border insolvency cases by allowing foreign debtors to access U.S. bankruptcy protections through recognition of foreign proceedings.1 They are not standalone proceedings, but rather ancillary to foreign proceedings that enable U.S. courts to enforce foreign court orders and extend protections under U.S. bankruptcy or other law such as the automatic stay.2

To grant recognition, U.S. bankruptcy courts look for three requirements set forth in Section 1517 of the Bankruptcy Code: (1) the presence of a foreign main or foreign nonmain proceeding; (2) the foreign representative applying for recognition is a person or body; and (3) the petition is not manifestly contrary to public policy. These are evaluated formulaically, and Chapter 15 is usually granted.3

2. Emerging Trends

In Harrington v. Purdue Pharma L.P., the U.S. Supreme Court barred nonconsensual third-party releases under Chapter 11 of the Bankruptcy Code absent specific statutory authority. The ruling, however, did not address Chapter 15 or comity-based recognition—leaving space for U.S. courts to enforce foreign restructuring plans that include such releases—many of which still permit them.

That flexibility was underscored in In re Crédito Real, where a Mexican court-approved restructuring plan included nonconsensual third-party releases.4 The United States International Development Finance Corporation objected to Chapter 15 recognition of that plan on public-policy grounds, urging the application of Purdue.5 U.S. Bankruptcy Judge Horan disagreed, ruling that Chapter 15 prioritizes comity6 and that Bankruptcy Code section 1521(a)(7) provides broader authority than its Chapter 11 counterpart does.7 He further noted that Section 1506’s public-policy exception must be applied narrowly: only when a foreign judgment is manifestly contrary to U.S. principles.8

A similar ruling followed in In re Odebrecht. There, Judge Glenn recognized a Brazilian Court-approved restructuring plan under Chapter 15 despite objections from the United States Trustee.9 He distinguished Chapter 11 from Chapter 15, emphasizing comity, and agreed with Judge Horan’s rationale, noting §1521(a)(7) offers broader discretion than §1123(b)(6) in Chapter 11.

By contrast, In re Mega NewCo tested the limits of this deference to foreign plans under Chapter 15. The debtor was a newly formed and wholly owned subsidiary of a Mexican financial services company.10 The parent company did not dispute the fact that the subsidiary was incorporated in England for the sole purpose of restructuring.11 By initiating proceedings in the English Court, the parent company avoided complications that would have arisen under both Mexican and U.S. bankruptcy law. Judge Wiles granted recognition—but not without hesitation. He noted the subsidiary had no “regular market-facing activities” in England12 and suggested the outcome might differ if creditors had objected.13 This statement suggests that U.S. courts may draw the line for U.S. recognition where such tactical maneuvers suggest abuse, making recognition contrary to U.S. public policy and inappropriate under Chapter 15.

This article is available in the Jenner & Block Japan Newsletter. / この記事はJenner & Blockニュースレターに掲載されています。

[1] 11 U.S.C. § 1525.

[2] Id. §§ 1520(a); 1509.

[3] In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 125 (Bankr. S.D.N.Y. 2007) (“The [Chapter 15] determination is a formulaic one.”).

[4] In re Crédito Real, S.A.B. de C.V., SOFOM, E.N.R., No. 25- 10208 (TMH), 2025 WL 977967 (Bankr. D. Del. Apr. 1, 2025).

[5] Id.

[6] Id. at *6.

[7] Id. at *10.

[8] Id. at *7.

[9] In re Odebrecht Engenharia e Construção S.A. – Em Recuperação Judicial, No. 25-10482 (MG), 2025 WL 1156607 (Bankr. S.D.N.Y. April 21, 2025).

[10] In re Mega Newco Ltd., No. 24-12031 (MEW), 2025 WL 601463 (Bankr. S.D.N.Y. Feb. 24, 2025).

[11] Id. at *3.

[12] Id. at *2.

[13] Id. at *4.

Footnotes

[1] 11 U.S.C. § 1525.

[2] Id. §§ 1520(a); 1509.

[3] In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 125 (Bankr. S.D.N.Y. 2007) (“The [Chapter 15] determination is a formulaic one.”).

[4] In re Crédito Real, S.A.B. de C.V., SOFOM, E.N.R., No. 25- 10208 (TMH), 2025 WL 977967 (Bankr. D. Del. Apr. 1, 2025).

[5] Id.

[6] Id. at *6.

[7] Id. at *10.

[8] Id. at *7.

[9] In re Odebrecht Engenharia e Construção S.A. – Em Recuperação Judicial, No. 25-10482 (MG), 2025 WL 1156607 (Bankr. S.D.N.Y. April 21, 2025).

[10] In re Mega Newco Ltd., No. 24-12031 (MEW), 2025 WL 601463 (Bankr. S.D.N.Y. Feb. 24, 2025).

[11] Id. at *3.

[12] Id. at *2.

[13] Id. at *4.

© 2026 Jenner & Block LLP. Attorney Advertising. Jenner & Block LLP is an Illinois Limited Liability Partnership including professional corporations. This publication, presentation, or event is not intended to provide legal advice but to provide information on legal matters and/or firm news of interest to our clients and colleagues. Readers or attendees should seek specific legal advice before taking any action with respect to matters mentioned in this publication or at this event. The attorney responsible for this communication is Brent E. Kidwell, Jenner & Block LLP, 353 N. Clark Street, Chicago, IL 60654-3456. Prior results do not guarantee a similar outcome. Jenner & Block London LLP, an affiliate of Jenner & Block LLP, is a limited liability partnership established under the laws of the State of Delaware, USA and is authorised and regulated by the Solicitors Regulation Authority with SRA number 615729. Information regarding the data we collect and the rights you have over your data can be found in our Privacy Notice. For further inquiries, please contact dataprotection@jenner.com.

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