When Japan Airlines Corp. filed for bankruptcy last month, both the company and the Japanese government went to great lengths to assure a concerned public that Asia's biggest carrier would remain airborne. The legal runway for that flight is less straightforward.

The Japan Airlines filing highlights a complex and confusing set of bankruptcy rules and regulations. Restructuring mechanisms sometimes compete with each other. The role of creditors can be easily misunderstood. And comparisons made between Japanese laws and America's bankruptcy system can be highly misleading. "This is not Chapter 11," says one Tokyo-based lawyer flatly.

Japan Airlines presents an especially complicated case, say legal practitioners, in part because it is so high profile and politically sensitive.

Japan Airlines filed for bankruptcy on Jan. 19 in a Tokyo district court. With ¥2.32 trillion ($25.6 billion) in liabilities, it marks the country's largest-ever nonfinancial institution bankruptcy. JAL was forced into bankruptcy when the government of Prime Minister Yukio Hatoyama, whose Democratic Party of Japan took power in September after decades of rule by the Liberal Democratic Party, rejected a bailout for the loss-making carrier. JAL had remained solvent for years through government doles.

That doesn't mean the government is turning its back on what was once the national carrier. "There's cultural pressure. There's legal pressure. There's political pressure," says another lawyer.

The government leaned on commercial creditors in the months before the bankruptcy to agree to a debt restructuring that will result in billions of dollars of write-downs. Lawyers caution, however, that this shouldn't be misconstrued as the equivalent of a U.S. prepackaged bankruptcy. "It hasn't been finalized," says the first lawyer, who asked not to be identified because his firm counsels JAL.

Government banks will provide new funds, though how much remains unclear. The government has pledged more than $5 billion in working capital.

JAL filed under a decades-old provision in commercial law known as corporate reorganization. Shareholders are wiped out, and the stock will be delisted on Feb. 20. A reorganization plan is due June 30, with court approval expected later this year.

Corporate reorganization shouldn't be confused with a more recent legal mechanism, which is usually translated as civil rehabilitation. Enacted in 2000, civil rehabilitation provides for management to retain control, in effect as a debtor-in-possession, and has understandably been popular with executives who want to keep their jobs. The most high-profile civil rehabilitation case is the Japanese subsidiary of Lehman Brothers Holdings Inc., although Lehman's decision to attempt the route of civil rehabilitation is proving controversial.

Civil rehabilitation may find favor with management, but it has serious drawbacks. Most notably, a debtor lacks legal protection against secured creditors, who can move to regain control of assets that serve as collateral for loans.

All creditors are enjoined in a corporate reorganization. This form of insolvency is limited to larger corporations. A district court judge appoints a trustee, who has broad powers. Trustees are expected to weigh the rights and interests of various stakeholders, including employees. In the past, a trustee was almost always a bankruptcy lawyer whose initial task was to kick out top executives, remove directors and assume management control.

That's beginning to change. Last year, the flash memory chip manufacturer Spansion LLC went into Chapter 11. When the Japanese subsidiary filed, a judge appointed as trustee a manager of the company, which is about the closest the country has come to Chapter 11. It also blurred the distinction between the country's restructuring regimes, says another Tokyo-based lawyer.

In the case of JAL, co-trustees were appointed. Eiji Katayama, a veteran bankruptcy lawyer, will supervise legal proceedings. The Enterprise Turnaround Initiative Corp. will handle the management restructuring and, unusually, will act as the airline's financial sponsor, although most funding is likely to come from the Development Bank of Japan.

Created in October, ETIC is the newest government financial agency charged with providing funding to strapped companies, mostly small and midsized enterprises.

In a Japanese reorganization, creditors lack much of the clout that they carry in a U.S. Chapter 11 proceeding. There is no creditors' committee. The trustee is under no obligation to consult creditors when fashioning a reorganization plan. "The court may have to listen to the creditors' view but doesn't have to take that view into account," says the lawyer.

Japanese corporate reorganization has no provision for debt-equity swaps. Japanese creditors get paid in cash, usually a percentage of their loans, over a several-year period. Financial sponsors get 100% of the new equity. Reorganized companies are rarely re-listed on the stock exchange.

"This is not a creditor-driven process as it is in Chapter 11," says F. Mark Fucci, a Tokyo-based partner and insolvency specialist at Bingham McCutchen LLP.

Fucci adds that over the past decade or so, as more offshore investors and distressed-debt funds plied Japanese waters, some creditors began demanding a say in restructuring plans. "Creditors are getting tougher and tougher," he says. However, "it's not remotely close to what a creditor experienced in Chapter 11 is used to."

Creditors can vote against a plan. (Two-thirds to three-fourths approval is needed of secured creditors, depending on the provisions of the plan, while a simple majority of unsecured creditors is required. Liquidation requires a 90% vote.) It's rare to have a reorganization defeated, however, although not unprecedented. Last year, creditors twice rejected the sale of failed Japanese real estate investment trust New City Residence Investment Corp. to U.S. distressed-investment firm Lone Star Funds.

Typically, a trustee identifies potential buyers for the company or its assets -- asset sales similar to Section 363 sales in the U.S. are allowed. Often, the trustee sets up an auction.

JAL has said that it plans to sell many of its subsidiaries. The reorganized airline could eventually find itself back on the Tokyo bourse. ETIC is designed to lend money for only three years, after which it is expected to exit.