A Bank Account Opened 16 Days Before Filing Was Enough to Establish Bankruptcy Venue — And the Court Blamed Congress

Bankruptcy venue shopping has been a contentious topic for years. Debtors pick forums they perceive as favorable — Delaware, the Southern District of New York, the Southern District of Texas — and creditors cry foul. The debate typically plays out in the background of billion-dollar restructurings, and the results depend heavily on how courts interpret the venue statute. On March 16, 2026, the United States Bankruptcy Court for the District of New Jersey weighed in with one of the most candid opinions on the subject in recent memory. In In re Multi-Color Corporation, Case No. 26-10910, Judge Michael B. Kaplan denied motions to dismiss or transfer a group of chapter 11 cases even though the debtor that anchored venue in New Jersey had opened a bank account there just six weeks before filing and funded it only sixteen days before the petition date. The court's reasoning was straightforward, its discomfort was palpable, and its message to Congress was unmistakable.

The facts are worth understanding in some detail because they illustrate exactly how the venue game is played. MCC-Norwood, LLC was a dormant Ohio limited liability company. It had been formed in 2014 to acquire a manufacturing facility, but that facility was closed and sold in 2023. By the time of the bankruptcy filing, MCC-Norwood had no employees, no customers, and no operations. What it did have was a guaranty obligation on approximately $5.5 billion in funded debt across the Multi-Color corporate family. Six weeks before filing, MCC-Norwood opened a bank account at ConnectOne Bank in Englewood Cliffs, New Jersey. The account was subsequently funded with approximately $1.05 million. On January 29, 2026, sixteen days after funding, the debtors filed their chapter 11 petitions in New Jersey, relying on MCC-Norwood's bank account as the basis for venue.

A group of prepetition lenders and the United States Trustee promptly challenged the filing. Their argument was intuitive: this was a manufactured venue play. A dormant entity with no real connection to New Jersey opened a bank account for the sole purpose of establishing venue in a preferred forum. The account was not used for business operations. It was not part of the debtor's historical activity. It was a tool to get the case filed where the debtors wanted it.

Under 28 U.S.C. § 1408, a voluntary bankruptcy petition may be filed in the district where the debtor's domicile, residence, principal place of business, or principal assets have been located for the 180 days preceding the petition, or for a longer portion of that 180-day period than in any other district. The debtors relied on the "principal assets" prong. Their argument was simple: MCC-Norwood's principal asset was the $1.05 million in the ConnectOne Bank account, and that account was located in New Jersey.

The movants countered with several arguments. First, they argued that bank accounts are intangible assets that should be deemed located at the account holder's domicile under the common law doctrine of mobilia sequuntur personam — the principle that movable property follows the person. Under that theory, the bank account would be located in Ohio, where MCC-Norwood was organized, not in New Jersey where the bank happened to be. Second, the movants pointed to other assets — patents, intercompany receivables exceeding $158 million, and D&O insurance rights — that they contended were the debtor's true principal assets and were all located outside New Jersey.

Judge Kaplan rejected every argument the movants raised, but he did so with visible reluctance. On the threshold question of how to determine the location of a bank account, the court held that a bank account is located where it is opened and maintained. Citing prior bankruptcy decisions and Article 9 of the Uniform Commercial Code, the court found that the ConnectOne Bank account was located in Englewood Cliffs, New Jersey, under a deposit agreement governed by New Jersey law. The mobilia sequuntur personam doctrine, the court reasoned, was not the appropriate framework for determining the situs of a deposit account in the bankruptcy venue context.

On the question of whether the bank account was MCC-Norwood's principal asset, the court had to choose between two competing analytical frameworks. Under what the court called the "Time-Based Approach," a court would identify the principal asset on each day of the 180-day lookback period and then determine where that asset was located for the longest portion of that period. Under this approach, the movants would have prevailed easily — the bank account existed for only 16 of the 180 days. Under the "Asset-Based Approach," a court first identifies the debtor's principal asset as of the petition date and then asks where that asset was located during the lookback period.

Judge Kaplan adopted the Asset-Based Approach, and his reasoning was grounded in practical administration of the estate. He offered a hypothetical that illustrated the problem with the Time-Based Approach: imagine a debtor that owns two pieces of equipment, one in Kansas and one in Texas. The Kansas equipment is far more valuable, but it is destroyed by a tornado ten days before the petition date. Under the Time-Based Approach, venue would lie in Kansas — the district where the debtor's principal asset was located for 170 of the 180 days — even though the debtor no longer owns anything there. The Asset-Based Approach avoids that absurd result by focusing on what the debtor actually owns when it files.

Applying the Asset-Based Approach, the court found that the ConnectOne Bank account was MCC-Norwood's principal asset both quantitatively and qualitatively. The court systematically disposed of the competing assets the movants had identified. The patents had never been appraised, and without expert valuation evidence, the court found they did not displace over $1 million in cash. The intercompany receivable balances, though nominally exceeding $158 million on the books, were shown through unrebutted expert testimony to be legacy bookkeeping entries that lacked economic substance and had been reclassified to zero before the petition date. The D&O insurance rights were contingent, shared across multiple entities, and had not been triggered — insufficient to outweigh cash on hand.

After also declining to transfer the case under 28 U.S.C. § 1412, Judge Kaplan delivered what he called a "gut check." The court acknowledged openly that the bank accounts were opened so that MCC-Norwood could file in New Jersey. The court conceded that this outcome might not sit right with the parties in interest and noted that it shared that sentiment. But Judge Kaplan placed responsibility squarely on Congress. He pointed out that legislation to reform the venue statute — including H.R. 1017, which would have excluded cash and cash equivalents from the definition of "principal assets" — has repeatedly been introduced and has repeatedly died in committee. Where Congress is aware of an issue and declines to act, the court reasoned, courts are not free to rewrite the statute from the bench.

For practitioners, Multi-Color is significant on several levels. First, it confirms that under current law, a debtor can establish venue by opening and funding a bank account in a chosen district, provided the account constitutes the debtor's principal asset. The statute does not impose any minimum holding period, any operational nexus, or any requirement that the asset predate the 180-day lookback window. If the asset exists when the petition is filed and is the debtor's principal asset, the venue requirement is met.

Second, the decision shifts meaningful burden to creditors who want to challenge venue. Under Multi-Color, it is not enough to point to other potential assets and argue that they should be considered the debtor's principal assets. You need evidence — and in some circumstances, expert testimony — to establish the value of those competing assets. The movants in Multi-Color failed on the patent argument precisely because they did not bring an appraiser. The intercompany receivable argument failed because the debtor's expert testified, without rebuttal, that the balances were economically meaningless. Creditors who want to win venue challenges need to come prepared with rigorous evidence, not just intuitive arguments about fairness.

Third, the opinion is a clear signal that venue reform, if it happens, will have to come from Congress. Courts in Delaware, the Southern District of New York, and now New Jersey have all applied the venue statute as written, even when the results strain common sense. Judge Kaplan's opinion is effectively an invitation to Congress to finish what H.R. 1017 started. Whether Congress will accept that invitation remains to be seen.

For business owners and creditors who may be affected by large chapter 11 filings, the practical lesson from Multi-Color is that venue in bankruptcy is a strategic decision controlled almost entirely by the debtor. If you are a creditor in a relationship with a borrower that has a complex corporate structure — multiple entities, holding companies, dormant subsidiaries — you should understand that any one of those entities could potentially be used as a venue anchor. The guaranty obligations that connect entities across a corporate family mean that even a shell entity with no operations can drag an entire enterprise into a forum of the debtor's choosing.

Whether you think venue shopping is a feature or a bug of the bankruptcy system depends largely on where you sit. Debtors and their professionals view forum selection as a legitimate exercise of statutory rights. Creditors view it as gamesmanship that adds cost and complexity to cases that are already expensive and difficult. Judge Kaplan managed to validate both perspectives in a single opinion: the law allows it, the court enforced it, and Congress should think about whether that is the right result.

Until Congress acts, Multi-Color is the law in New Jersey — and its reasoning is likely to influence courts in other districts facing similar challenges. If you are planning or responding to a large bankruptcy filing, the venue analysis starts with understanding the corporate structure, identifying which entities could serve as venue anchors, and knowing which courts have applied the principal-assets test in a way that favors your position. Multi-Color just gave debtors another precedent in their arsenal and gave creditors another reason to push for legislative reform.