IRM 5.9, Bankruptcy and Other Insolvencies, contains the IRS's position, procedures, information, instructions, guidance, and references concerning bankruptcy cases, stockbroker insolvencies, receiverships, assignments for the benefit of creditors, corporate dissolutions, and bulk sales.

The Insolvency program operates within the guidelines of the US Bankruptcy Code (11 USC) and the Federal Rules of Bankruptcy Procedure.

IRM 5.9.3.1.2, Authority, contains Insolvency caseworkers’ authority in the Insolvency program.

Roles and Responsibilities. SCI implements bankruptcy procedural guidelines, controls and monitors bankruptcy cases for the IRS, and takes appropriate case actions on all of the bankruptcy cases assigned to Insolvency. Field Insolvency (FI) caseworkers also work receiverships, Securities Investor Protection Act (SIPA) proceedings, and assignments for the benefit of creditors. IRM 5.9.1.4, The Role of Insolvency, contains a detailed explanation of the roles and responsibilities of Insolvency.

Contacts. SCI employees deal directly with Associate Area Counsel (SB/SE), Department of Justice, Assistant US Attorneys, Bankruptcy Court employees, trustees, debtors and their attorneys, and IRS employees in other functions throughout the IRS.

Advice and Guidance. SCI employees are trained in specific areas of bankruptcy law that deal with tax administration and debtor protection. When confronted with bankruptcy issues beyond the scope of their knowledge and expertise, they are to seek guidance from Counsel.

Directions from Insolvency. SCI employees provide directions on bankruptcies to other IRS functions. When IRS personnel contact SCI regarding a bankruptcy–related issue, they should comply with the advice and guidance given by Insolvency. If additional assistance is required, SCI employees will contact Counsel on behalf of other IRS employees.

IRM 1.4.51.8.3, Case Management Tools, IRM 5.9.12, Insolvency Automated Processes, and IRM 5.9.16, Insolvency Case Monitoring, contain a list of required reports for caseworkers and managers to utilize for inventory management and review of case inventories. These sections also include the frequency and purpose of each report.

National quality reviews and consistency reviews are conducted on a regular basis. See IRM 1.4.51.16.1, NQRS, and IRM 1.4.51.16.2, EQ Consistency Reviews, for more information.

Operational and program reviews are conducted on a yearly basis. See IRM 1.4.51.17.2, Operational Review, and IRM 1.4.51.17.5, Program Reviews, for more information.

Managers are required to follow program management procedures and controls addressed in IRM 1.4.51.5.2, Reviews (Overview), IRM 1.4.51.15, Controls, and IRM 1.4.51.16, Quality.

Caseworkers and managers utilize the Automated Insolvency System (AIS) for case management, assignment and documentation of all insolvency and non-bankruptcy insolvency cases. See IRM 5.9.3.2, Automated Insolvency System (AIS).

A glossary of terms used by Insolvency can be found in the Exhibit in IRM 5.9.1-1, Glossary of Common Insolvency Terms.

Common acronyms acceptable for use in the Automated Insolvency System (AIS) history are listed in the Exhibit in IRM 5.9.1-2, Acronyms and Abbreviations.

Additional acceptable acronyms and abbreviations are found in the ReferenceNet Acronym Database, which may be viewed at: https://rnet.web.irs.gov/Resources/AcronymSearch.aspx

Acronyms used specifically in this IRM section are listed below:

Procedural guidance on insolvencies can be found throughout IRM 5.9, Bankruptcy and Other Insolvencies.

The US Bankruptcy Code and Rules Booklet

AIS User Guide, Document 13219

Insolvency Interface Program (IIP) User Guide, Document 11834

Insolvency/Bankruptcy, My SB/SE page https://irsgov.sharepoint.com/sites/ETD-KMT-KB114

Specialty Collection Insolvency, IRS Source page https://irssource.web.irs.gov/SBSE/SitePages/SpecialtyColl.aspx

Initial Processing and Loading the Case. Centralized Insolvency Operation loads Chapter 9 cases on the Automated Insolvency System. 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 5.9.11.4.2, Time Sensitive Mail.)

Misdirected Payments. Chapter 9 payments received 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.

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

Prompt Counsel Involvement. When Field Insolvency is assigned a bankruptcy filing involving debts of a municipality, immediately contact Counsel for guidance. Chapter 9 is a complex bankruptcy proceeding.

Chapter 15. Chapter 15 is divided into several sub-chapters (general provisions; access of foreign representatives and creditors to the court; recognition of a foreign proceeding and relief; cooperation with foreign courts and foreign representatives; and concurrent proceedings) that provide a framework for cooperation between the United States and foreign countries as to insolvency cases. The proceedings commenced under Chapter 15 are termed "ancillary" cases. Other defined terms (see 11 USC 1502) unique for Chapter 15 are:

Petition for Recognition. To commence an ancillary case under Chapter 15, a petition for recognition of the foreign proceeding is filed by the foreign representative. The Bankruptcy Code requires that certain documents accompany the petition for recognition, such as a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; a certificate from the foreign court affirming the existence of such foreign proceeding and the appointment of the foreign representative; or any other acceptable evidence proving the existence of the proceeding and appointment. The petition for recognition should also be accompanied by a statement identifying all known foreign proceedings related to the debtor. All documents must be translated into English. Also, Bankruptcy Rule 1007(a)(4) sets forth additional documents that must be filed with the petition for recognition.

Notice of Hearing on Petition for Recognition. Bankruptcy Rule 2002(q)(1) provides that the clerk, or some other person as the court may direct, provides notice of the recognition hearing to the debtor, all persons or bodies authorized to administer foreign proceedings of the debtor, all entities against whom provisional relief (discussed below) is sought, all parties to litigation pending in the United States in which the debtor is a party at the time of the filing of the petition, and such other entities as the court may direct. Such notice must be mailed at least 21 days in advance of the hearing on the petition for recognition of a foreign proceeding and such notice must state whether the petition seeks recognition as a foreign main proceeding or foreign non-main proceeding. See Bankruptcy Rule 2002(q).

Provisional Relief. Unlike voluntary cases filed under title 11, the automatic stay does not go into effect when a petition for recognition is filed. There is a gap period from the filing of the petition for recognition until the court rules on the petition. Where relief is urgently needed to protect the assets of the debtor or the interests of creditors, the foreign representative may request provisional relief. The court may grant the following types of provisional relief:

Effects of Recognition of a Foreign Main Proceeding. When the court enters an order recognizing a foreign main proceeding, certain relief is granted to the foreign representative automatically, including, among other relief:

Additional Relief Requests from the Foreign Representative. The court may grant any additional appropriate relief requested by the foreign representative once the court recognizes the foreign proceeding (whether main or non main) within the parameters of 11 USC 1521 including (among other relief):

Commencement of a Case Under Another Chapter of the Bankruptcy Code After Recognition of a Foreign Main Proceeding in Chapter 15.

Coordination of a Case Under Title 11 and a Foreign Proceeding. If a foreign proceeding and a case under another chapter of title 11 are pending at the same time regarding the same debtor, the Bankruptcy Court must seek cooperation and coordination with the foreign courts or representatives and may suspend or dismiss the title 11 case, if in the interest of the creditors and the debtor.

Case Pending Under Another Chapter at the Time Petition for Recognition is Filed. When there is a case under another chapter pending at the time a Chapter 15 case is filed, relief (including provisional relief) will be granted only if consistent with the relief granted in the case pending in the United States, and the effects of recognition of a foreign main proceeding (such as the automatic stay) do not apply. Generally a United States case trumps a foreign proceeding.

Case Commenced Under Another Chapter after Recognition or Petition for Recognition Filed. If a case is filed under another bankruptcy chapter after a petition for recognition is filed or after recognition is granted to the foreign representative, any relief granted in the Chapter 15 case must be modified or terminated if it is inconsistent with the case under another chapter of the Bankruptcy Code.

Rule of Payment in Concurrent Proceedings. In concurrent proceedings, a creditor cannot receive more favorable treatment than other creditors in the same class by payment of the same claim in foreign insolvency proceedings.

Initial Processing and Loading the Case. As with Chapter 9 cases, Centralized Insolvency's involvement with Chapter 15 bankruptcies is limited to loading the cases on AIS. Any reports generated by the IIP must be forwarded to the FI group assigned the case following expedited procedures. (See IRM 5.9.11.4.2, Time Sensitive Mail.)

Misdirected Payments. CIO will post Chapter 15 payments that are sent in error. Chapter 15 payments received at the CIO must be applied to the non plan screen. The CIO Payment Posting Unit must advise the FI office assigned the case of the payment receipt so the payment can be applied to the proper tax liability.

Initial Case Review. Upon notice of a Chapter 15 case, Field Insolvency must add the case to AIS. The caseworker must review the Chapter 15 case to determine if a referral should be made to Counsel.

Counsel Referral Criteria. Caseworkers should review the petition for recognition and the related documents. Research IDRS to determine if the debtor has any outstanding federal tax liabilities. Refer the case to Counsel if the documents show that any of the following criteria are met:

Notification of Filings in a Chapter 15 Case. If Field Insolvency receives notice of the filing of a motion or other document in a Chapter 15 case, determine if an initial case review has been conducted. If a review was not done, caseworkers should conduct an initial review of the case, including a review of the document received. Send a referral to Counsel if necessary. If an initial case review was previously conducted and it was determined the referral criteria was not met, the caseworker should review the document received and determine if it is now necessary to refer the case based on a change in conditions. If the caseworker has questions about the document received, Counsel should be contacted for guidance. For previously referred cases, the document should be forwarded to Counsel for association with the file.

Referral to Counsel. Refer cases meeting the referral criteria as soon as possible after the initial case review, or after a determination is made following receipt of notice that the referral criteria has been met. Include the following items in the referral package:

Chapter 15 Payments. The Field Insolvency office handling a Chapter 15 case must instruct the foreign representative to send bankruptcy payments to that local office.

Closing a Chapter 15 Case. A debtor in a Chapter 15 case does not receive a discharge. No tax liability should be abated when only a Chapter 15 case is filed in the United States. If another case is filed for the debtor under another chapter, such as a Chapter 7 or 11 case, refer to the discussion under IRM 5.9.7.2.2, Concurrent Insolvency Proceedings. A Chapter 15 case should be closed on AIS as a dismissal.