Accessibility Skip to Top Navigation Skip to Main Content Home  |  Change Text Size  |  Contact IRS  |  About IRS  |  Site Map  |  Español  |  Help  

Part 5. Collecting Process

Chapter 9. Bankruptcy and Other Insolvencies

Section 7. Processing Chapter 9 and Chapter 15 Bankruptcy Cases

5.9.7  Processing Chapter 9 and Chapter 15 Bankruptcy Cases

5.9.7.1  (05-13-2008)
Chapter 9 – Adjustment of a Municipal Debt

  1. Qualifications. To qualify as a debtor under Chapter 9, Adjustment of a Municipal Debt, an entity must, among other things:

    • be a municipality

    • be authorized to be a debtor by state law

    • be insolvent or unable to meet its debts as they mature

    • desire to effect a plan to adjust such debts

  2. Confirmation Binding. The provisions of a confirmed plan under this Chapter bind the debtor and any creditor, whether or not:

    1. a proof of such creditor’s claim is filed;

    2. such claim is allowed under 11 USC § 502; or

    3. such creditor has accepted the plan.

5.9.7.1.1  (01-01-2006)
Centralized Insolvency Operations

  1. Loading the Case. Centralized Insolvency's involvement with Chapter 9 bankruptcies is limited to loading the cases on the Automated Insolvency System (AIS). Any reports generated by the Insolvency Interface Program are to be forwarded to the Field Insolvency group assigned the case following expedited procedures. (See IRM 5.9.11.3.2,Time Sensitive Mail.)

5.9.7.1.2  (01-01-2006)
Field Insolvency

  1. Asset Proceeding. All proceedings under Chapter 9 are to be treated as "asset" cases.

  2. Prompt Counsel Involvement. When Field Insolvency is assigned a bankruptcy filing involving debts of a municipality, immediate contact must be made with Counsel for guidance. Chapter 9 is a complex bankruptcy proceeding.

    Note:

    Because of the rare occurrence of a Chapter 9 bankruptcy, IRM 5.9, Bankruptcy and Other Insolvencies, contains limited information on this chapter of bankruptcy filing.

5.9.7.2  (03-01-2007)
Chapter 15 - Cross-Border Insolvency

  1. International Cooperation. A primary goal of Chapter 15 bankruptcy is to increase international cooperation in cross-border cases by enabling US bankruptcy courts to recognize foreign insolvency proceedings. Chapter 15 applies in the following circumstances:

    1. A foreign court or a foreign representative seeks assistance in the United States in connection with a foreign proceeding;

    2. Assistance is requested in a foreign country in connection with a case under 11 USC;

    3. A foreign proceeding and a domestic bankruptcy for the same debtor are pending concurrently; or

    4. Parties of interest in a foreign country wish to commence or participate in a case under 11 USC.

  2. Ineligible Parties. Chapter 15 bankruptcy does not apply to the following:

    1. A proceeding concerning an entity, other than a foreign insurance company, identified by exclusion in 11 USC § 109(b) (including railroads, domestic insurance companies, banks, and other listed financial institutions).

    2. An individual (or individual and spouse) who has debts within the limits in 11 USC § 109(e) (debt limits to qualify as a debtor under Chapter 13) and who is a US citizen or lawful alien.

    3. Certain stockbrokers and commodity brokers.

  3. International Scope. The requirements of international law make the discussion of Chapter 15 bankruptcies too complex to be included at length in this IRM.

5.9.7.2.1  (05-13-2008)
Centralized Insolvency

  1. Initial Processing. As with Chapter 9 cases, Centralized Insolvency's involvement with Chapter 15 bankruptcies is limited to loading the cases on the Automated Insolvency System (AIS) and posting any Chapter 15 payments that are sent to the CIO in error rather than to the Field Insolvency office handling the case. Any reports generated by the Insolvency Interface Program must be forwarded to the Field Insolvency group assigned the case following expedited procedures. (See IRM 5.9.11.3.2,Time Sensitive Mail.)

5.9.7.2.1.1  (05-13-2008)
Loading Chapter 15 Cases on AIS

  1. Cases Initially Identified as Chapter 15. AIS has no dedicated database to support Chapter 15 filings. Therefore, when notice of a bankruptcy filing clearly identifies the proceeding as a Chapter 15, the CIO must load the case as a Chapter 11 proceeding. On the first available history line, the clerk loading the case must enter in capital letters surrounded by asterisks:
    *******************************
    CHAPTER 15 BANKRUPTCY
    *******************************
    Using this history entry allows identification of Chapter 15 cases through a word search. If a case previously loaded as a Chapter 7 or Chapter 11 proceeding is determined to be a result of a Chapter 15 filing, the same history entry as above should be inserted into the first available history line.

5.9.7.2.1.2  (05-13-2008)
Chapter 15 Payments Received by the CIO

  1. Misdirected Payments. Chapter 15 payments received from the trustee or debtor in possession at the CIO must be applied to the non plan screen. The CIO Payment Posting Unit must advise the Field Insolvency office assigned the case of the payment receipt, so the payment can be applied to the proper tax liability.

5.9.7.2.2  (05-13-2008)
Field Insolvency

  1. Prompt Counsel Involvement. When Field Insolvency is assigned a bankruptcy filing involving cross-border filings, the Insolvency specialist or advisor must contact Counsel for guidance within 10 calendar days of being assigned the case.

  2. Chapter 15 Payments. The Field Insolvency office handling a Chapter 15 case must instruct the trustee or debtor in possession to send bankruptcy payments to that local office.


More Internal Revenue Manual