The Splits from page 24 the incurrence of debt could be prosecuted as a non-dischargeable debt , the Fifth Circuit concluded that “[ a ] lthough the question is complicated by a certain textual awkwardness in the Bankruptcy Code , we ultimately side with the Fourth Circuit and rule that , in Subchapter V proceedings , both corporate and individual debtors are subject to the list of § 523 ( a ) discharge exceptions .” Id . at 226 .
The Fifth Circuit found that “ placing controlling weight on the word ‘ individual ’ in § 523 ( a ) disregards the plain language of § 1192 ( 2 ).” Id . at 228 . Noting that Congress could have enacted the words “ kind of debtor ” in Section 1192 , but instead chose “ kind of debt ,” the Fifth Circuit concluded , as had the Fourth Circuit , that this “ text cannot be read to incorporate a distinction between ‘ individual ’ and ‘ corporate ’ debtors .” Id . at 228 . Counter to the arguments of the Ninth Circuit BAP , the Fifth Circuit agreed with the Fourth Circuit that “ to the extent §§ 523 ( a ) and 1192 ( 2 ) clash , § 1192 ( 2 ) governs as the more specific provision .” Id . at 229 . It found that since Section 1192 deals directly with Subchapter V discharges and Section 523 is a broader discharge provision , “ the more specific provision should govern over the more general .” Id . ( citing Cleary Packaging , 36 F . 4th at 515 ). Addressing the Bankruptcy Court ’ s conclusion that this interpretation of Section 1192 ( 2 ) renders the use of the word “ individual ” in Section 523 ( a ) superfluous , the Fifth Circuit analyzed other such analogous “ surplusage ” in the Bankruptcy Code and noted that the “ preference for avoiding surplusage constructions is not absolute .” Id . at 229 ( internal citation omitted ). It then agreed with the amicus curiae filed by the United States that “ the anti-surplusage canon does not win the day here .” Id . The Fifth Circuit noted the inconsistency an alternative ruling would make on Section 1141 ( d )( 6 ), which would render a Subchapter V corporate discharge the broadest anywhere in the statute . Relying on Congress ’ decision to use the simple term “ the debtor ” in Section 1192 , which , by definition , encompasses both individual and corporate debtors , the Fifth Circuit explained that “[ w ] e cannot add words to § 1192 that Congress did not enact .” Id . at 230 . Then , agreeing with the Fourth Circuit to embrace the interpretation of the same statutory language in Chapter 12 , which had been interpreted to apply non-dischargeability provisions equally to individual and corporate debtors , the Fifth Circuit concluded that “[ w ] e see no reason why this sound analysis of § 1228 ( a )’ s text would not apply equally to the substantively identical phrase in § 1192 ( 2 ).” Id . at 231 . It further noted the consistency that “§ 1228 ( a ) is also referenced in § 523 ( a )’ s preamble along with § 1192 .” Id . Finally addressing the policy arguments , the Fifth Circuit stated that the legislative history of Subchapter V does not directly address this issue and concluded that “ like most legislation , Subchapter V is a compromise : affording small business debtors unique benefits while subjecting them to § 523 ( a )’ s dischargeability exceptions .” Id . at 232 .
The arguments on plain language , the application of the specific / general canon in statutory construction , the statutory context and consistency , and policy arguments are particularly interesting in this interpretation split . Will the split continue between Bankruptcy Courts and Circuit Courts or will this split rise up to the Circuit Court level ? That remains the question .
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