On March 4, 2013, ‘SA’ NYU WA, Inc., a tribally-chartered corporation wholly owned by the Hualapai Indian Tribe, filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court, District of Arizona. This is a very important case for tribes and any party conducting business with tribes because the petition will raise a question of first impression for the Bankruptcy Court. The Bankruptcy Court will have to decide whether a tribal corporation is eligible to be a debtor under the Bankruptcy Code.

Federally recognized tribes likely are not eligible for bankruptcy protection. This is because Section 109 of the Bankruptcy Code provides direction as to who may be a debtor: only a “person” or a “municipality” may file a bankruptcy petition for relief. Neither “person” or “municipality,” as defined by the Bankruptcy Code, expressly includes or excludes an Indian tribe, and no reported court decisions have expressly addressed whether an Indian tribe is eligible to file for bankruptcy as person, municipality, or otherwise. The definition of “person” under the Bankruptcy Code excludes “governmental units” from being eligible debtors. The Bankruptcy Code defines a “governmental unit” as, among other things, an “other foreign or domestic government.

However, in this case, the debtor alleges that it is a chartered tribal corporation, separate from the Hualapai Indian Tribe which owns it. The Bankruptcy Code allows a “corporation” to file for bankruptcy protection.