Why Xu Jiayin can file for bankruptcy protection in the United States
This time, Evergrande applied for "bankruptcy protection", not bankruptcy.
Bankruptcy protection means that, regardless of whether the debtor is solvent or not, when the debtor has filed an application for bankruptcy reorganization with the court, it may propose an insolvency reorganization plan to make arrangements for the period, manner and possible derogation of the interests of certain creditors and shareholders.
During the period of bankruptcy protection, creditors may not be compelled to repay debts.
Chapter 15 of the U.S. Bankruptcy Code allows foreign businesses to file for bankruptcy protection in the U.S. to handle cross-border bankruptcy cases.
Evergrande's purpose is to use this provision to avoid Evergrande's creditors from filing lawsuits or seizing assets in the United States, so as to better free up space and energy for asset restructuring and other rescue methods.
According to the law of the US icon, once Evergrande successfully files for bankruptcy protection in the United States, the US government will protect its assets in the United States, so that non-US creditors cannot dispose of Evergrande's assets in the United States.
In addition, Lao Mei can also use the provisions of the long-arm bill to pursue Evergrande's assets around the world, and the biggest problem is that this directly transfers the pressure to China's domestic financial system, because Evergrande has lent trillions of dollars to major Chinese banks. His foreign debts are basically based on the model of domestic guarantee and foreign loans, with assets pledged to domestic banks, and then guaranteed by domestic banks, and finally relying on this guarantee to borrow money from overseas institutions.
Once Evergrande cannot repay this money, the domestic bank that guarantees Evergrande will have to pay back for Evergrande.
