In Which District/Venue Should You Purchase the Asset?

Posted by Matthew Lein, Esq. on January 22, 2015

Guest Post By Matthew Lein, Esq.
Lein Law Offices

Investors must purchase assets from the district/venue where the bankruptcy case is filed.  If you purchase an asset of a bankruptcy estate, without further considerations, that asset must be purchased through the bankruptcy court where the case is pending.  In most individual or small business cases, the bankruptcy case will be filed in the district where the consumer(s) or business is located.  However, larger businesses (i.e. Enron Corp., Caesars Entertainment Corp.) may have additional choices in venue. 

Most cases must be filed in the federal district either: (1) in which the domicile, residence, principal place of business in the United States, or principal assets in the United States, of the person or entity that is the subject of such case have been located for the 180 days immediately preceding such commencement, or for a longer portion of such one-hundred-and-eighty-day period than the domicile, residence, or principal place of business, in the United States, or principal assets in the United States, of such person were located in any other district; or (2) in which there is pending a case under title 11 concerning such person’s affiliate, general partner, or partnership. 28 USC 1408(1)-(2).

The above statute applies to bankruptcy chapters 7 through 13.

Most non-large bankruptcies are filed in the district where the consumer(s) or business is physically located.  Those bankruptcies involve a consumer(s) or business that does not involve “[an] affiliate, general partner, or partnership” that reside outside the district.

Larger bankruptcies may involve “[an] affiliate, general partner, or partnership” that do reside outside the district where courts have looked to a variety of factors when determining if a venue is proper.  

No case is similar and almost no case fits perfectly in the statutory language outlined in 28 USC 1408(1)-(2).  Accordingly the court may rely on a number of factors outlined in previous bankruptcy cases to help it determine the correct venue.  The principal place of business and major business decisions are significant factors.  

Principal place of business
Principal place of business, for venue purposes, of corporate or other non-individual Chapter 11 debtors that, following suspension of their license to do business as professional medical corporations in California, had no further business activities, other than collection of unpaid accounts receivable, was the Northern District of Indiana where debtors' principal had relocated with all of debtors' business records, and which was also state in which debtors' tax returns were filed, though receiver appointed to administer assets of debtors for benefit of California judgment creditor was appointed by California court and was located in California; receiver had no authority to act on behalf of debtors, whose nerve center for any remaining management or operational decisions, such as they were, was state to which their principal had moved. In re West Coast Interventional Pain Med. Inc., 435 B.R. 569 (Bankr.N.D.Ind., 2010)

Venue of Chapter 11 bankruptcy case could be transferred from Middle District of Pennsylvania to the District of New Jersey, even though debtor's place of incorporation and its principal assets were in Pennsylvania, where “nerve center” or principal place of debtor's business was in New Jersey.  In re Deabel, Inc., 193 B.R. 739 (Bankr. E.D. Pa., 1996)

Partnerships and principal place of business
Venue for Chapter 11 case was properly in New York, though debtor partnership's sole asset was apartment complex in Arizona, in that principal place of partnership's business was in New York; though day to day decisions regarding management of property were made in Arizona, major business decisions for debtor were made in New York. In re Garden Manor Associates, LP, 19 B.C.D. 521, 99 BR 551 (Bankr. S.D.N.Y., 1988)



U.S. Bankruptcy Courts––Business and Nonbusiness Cases Commenced, by Chapter of the Bankruptcy Code, During the Three-Month Period Ending March 31, 2013, Based on Data Current as of March 31, 2013

In conclusion, in most instances that do not involve a large corporation, the asset will be purchased from the nearest bankruptcy court.  In instances that do involve a large corporation, the buyer must be prepared to purchase the asset from a non-local bankruptcy court.


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