D. Eligibility of Indian Entities to File for Bankruptcy
The Bankruptcy Code does not explicitly refer to Indian tribes. Therefore, in order to determine whether tribes can file for bankruptcy, one must analyze tribal eligibility under each Chapter.
1. Chapter 13
Bankruptcy under Chapter 13 is reserved for filings by individuals with regular income and is unavailable to corporations or partnerships. Although all individuals are persons under the Code, not all persons are individuals. Even though corporations and partnerships are persons under 101(41), they are not individuals and cannot file under Chapter 13. Similarly, an Indian tribe is not an individual person, so, like corporations or partnerships, it cannot file. Although an individual member of a tribe would qualify as an individual under this definition, the tribe itself does not qualify.
2. Chapter 9
Chapter 9 bankruptcies are for municipalities. To be eligible under this provision, an entity must meet all the requirements of 109(c), which provides that an entity may only be a debtor under this chapter if it (1) is a municipality; (2) is specifically authorized in its capacity as a municipality to be a debtor under State law or a governmental officer empowered by State law authorizes the entity to be a debtor under Chapter 9; (3) is insolvent; and (4) desires to effect a plan to adjust such debts.
Section 101(40) of the Code defines the term municipality as a political subdivision or public agency or instrumentality of a State. This definition seemingly precludes Indian tribes from being considered a municipality. To maintain that an Indian tribe is a subdivision or instrumentality of a state would contradict the principles of sovereignty and self-governance that underlie the political structure of Indian tribes. In addition, the requirement that the State authorize municipalities to file would also undermine sovereignty and self-governance. Requiring one sovereign, the State, to authorize the actions of another sovereign, the tribe, does not comport with traditional notions of sovereignty.
3. Chapter 11
Chapter 11 bankruptcies are designed for individuals and businesses that wish to reorganize their assets and liabilities. The eligibility criteria for filing under Chapter 11 are very similar to criteria under Chapter 7, where persons are eligible to file. The statutory definition of persons in 101(41) includes an individual, a partnership, and a corporation.
One could argue that a tribe qualifies as a corporation. Black's Law Dictionary defines a corporation as a group or succession of persons established in accordance with legal rules into a legal or juristic person that has legal personality distinct from the natural persons who make it up ... [possessing] the legal powers that its constitution gives it. Tribes are groups of individuals organized under tribal constitutions in accordance with federal law. Similar to the way corporations are governed by boards of directors, a governing body manages tribes. Like corporations, tribes take part in commercial ventures for profit and either disburse these profits to tribal members or use them to provide services to tribal members, similar to the use of corporate profits for the benefit of constituent shareholders. Nevertheless, despite these strong analogies, there is no precedent that has defined a tribe as a corporation under the Code in order to allow it to file for bankruptcy.
Although one could make the argument that tribes are corporations based on the above analogies, it is clear that tribes are more than a simple aggregation of individuals. Tribes are also sovereigns afforded special rights and protections by law. A tribe's additional rights and protections do not negate the parallels to a corporation that exist and may even add to the legal personality distinct from the natural persons who make [the corporation] up. The critical question is whether the features that distinguish a tribe from a corporation outweigh the parallels such that tribes would not be eligible to file for bankruptcy as corporations under Chapter 11.
4. Chapter 7
Chapter 7 is reserved for debtors who want to liquidate as opposed to restructuring. Section 109(b) of the Bankruptcy Code sets forth the eligibility requirements for filing for relief under Chapter 7. A person, as defined in 101(41), is eligible for relief under this chapter. Because most debtors that qualify for Chapter 11 also qualify for Chapter 7, determining tribal eligibility under Chapter 7 involves an analysis similar to the one above for Chapter 11, with a similarly uncertain outcome.
