That’s a bit off the topic of why companies incorporate in Delaware, to which I was responding, but the way Federal BR law works is that state law will come into play if and when there is what is called an “adversarial proceeding”.
Our Federal Court system is a bit complicated when it comes to what law the Federal Court will use. In a variety of circumstances, Federal Courts use state law, and are required to use state law, in deciding cases.
When a company declares bankruptcy they list their assets and creditors, and notice goes to all of the creditors. The Creditors have time to make a claim against discharge. If no one makes a claim, all debts are discharged unless they are by law not dischargeable, but most are, so it’s “Game Over”. Up to that point, it’s all federal law. However, there are various grounds by which a creditor can demand a judgment for money owed that will not discharge the debtor. Among these is FRAUD.
If someone brings an adversarial proceeding against BagMan’s gang of clowns (Yah think?) then some other law will come into play, but it will be the Federal BR judge applying it.
Which jurisdiction’s law regard fraud will be used depends on a number of things. By way of example, the parties may have a choice of law clause that the court might honor, or might refuse to honor. Choice of law is DIFFERENT from choice of forum. The forum is now Delaware, and any fraud action will be tried in Delaware, absent a successful motion for change of venue. It would be very unusual to have a first change of venue for the basic bankruptcy and then a motion to move it again for an adversariel proceeding, but the players are are after big stakes.
But assuming everything stays in Delaware, even then that does NOT mean that the Federal BR judge sitting in Delaware hearing the adversarial proceeding will use Delaware law. It could wind up being the laws of Antigua or the Bahamas.
Are you talking to hear yourself speak?
Check elsewhere, I'm all out of affirmation.
JMO, YMMV