College Columns June 2021 - Page 25

Doing the Splits continued from page 24
The Ghost of Business Present and Future – The Narrower Approach
On the other side of this statutory interpretation , the court in In re Thurman , Case No . 20-41400 , 2020 WL 7249555 ( Bankr . W . D . Mo . Dec . 8 , 2020 ) found that individual debtors who had ceased operating their businesses , sold the business assets and retired several months before filing under Subchapter V did not qualify as debtors “ engaged in commercial or business activities .” When the debtors filed under Subchapter V , their company had “ no employees , no customers , no vendors , and no intent to resume business activities .” All the company had was “ some outstanding accounts receivable and two cars ,” even though the entity itself remained in good standing under state law . In determining the debtors did not meet the “ engaged in commercial or business activities ” standard , the court interpreted “ engaged ” in line with several other long-standing provisions of the Bankruptcy Code and other federal statutes . Concluding that “[ t ] he plain meaning of ‘ engaged in ’ means to be actively and currently involved ,” the court noted that “[ t ] o add the word ‘ currently ’ to the phrase ‘ engaged in ’ would be redundant .” As there were no business activities at the time of the bankruptcy filing , the court found that the debtors did not qualify under Subchapter V .
Following the Thurman rationale , the court in In re Johnson , No . 19-42063- ELM ( Bankr . N . D . Tex . Mar . 1 , 2021 ) found individual debtors not to be “ engaged in commercial or business activities ” and thus ineligible for Subchapter V relief . One of the individual debtors had owned and managed several oil and gas companies prior to the bankruptcy filing , but each of these companies had ceased operations and were defunct before the date of the bankruptcy
filing . This individual debtor then took a job as an employee of a family owned business . His co-debtor wife worked as a nurse unrelated to his oil and gas business involvement . The court held , based on the plain language , prior statutory and judicial interpretation of that language and the legislative history , that “ the ‘ engaged in ’ inquiry is inherently contemporary in focus instead of retrospective ,” requiring current and not just past involvement in business . Further , the court found that simply being an employee of a company does not qualify as being “ engaged in commercial or business activities .”
The Ghosts of Business Past , Present and Future – A Mixture of the Broader and the Narrower Approach
In In re Ikalywych , 2021 WL 1433241 ( Bankr . D . Col . 2021 ), the court found the individual debtor to be “ engaged in commercial or business activities ” when he filed for bankruptcy based on his ownership interests in operating companies and his “ wind down ” work for a non-operating failed company even though his sole source of continued on page 26
25