BANKRUPTCY CORNER
Non-Individual Debtor Discharge in Subchapter V
JASON S . RIGOLI
Subchapter V of chapter 11 of the Bankruptcy Code 1 became effective on February 19 , 2020 2 and novel issues of its effect are still being addressed by the Courts . One such issue is whether a corporate ( or non-individual ) debtor can discharge debts that may otherwise be excepted from discharge for an individual debtor . Judge Maria Ellena Chavez-Ruark of the United States Bankruptcy Court for the District of Maryland recently addressed this novel issue . See Gaske , et al . v . Satellite Restaurants Inc ., et al . ( In re Satellite Restaurants , Inc .), Case No . 21-00012-MCR , 2021 Bankr . LEXIS 652 ( Bankr . D . Md . Mar . 19 , 2021 ).
Procedural Background of Satellite Restaurants
Corporate debtor was sued by former employees for various violations of the Fair Labor Standards Act and applicable state laws in federal district court . Debtor then filed a voluntary petition under subchapter V of Chapter 11 of the Bankruptcy Code and the former employees filed an adversary complaint seeking to have their debts excepted from discharge under §§ 523 ( a )( 2 ) ( A ) and ( a )( 6 ) of the Bankruptcy Code . The corporate debtor filed a motion to dismiss , arguing that the exceptions in § 523 did not apply to corporate debtors in subchapter V .
Analysis
Section 1192 is the discharge provision applicable in cases where a subchapter V debtor seeks to cramdown a plan under § 1191 ( b ). Section 1192 reads , in pertinent part :
If the plan of the debtor is confirmed under section 1191 ( b ) of this title [ the cramdown provision for Subchapter V cases ], as soon as practicable after completion by the debtor of all [ plan ] payments ..., the court shall grant the debtor a discharge of all debts provided in section 1141 ( d )( 1 )( A ) of this title , and all other debts allowed under section 503 of this title and provided for in the plan , except any debt ... of the kind specified in section 523 ( a ) of this title .
11 U . S . C . § 1192 ( 1 ). The court then looked at the language of § 523 ( a ) to determine what debts are excepted from discharge . Section 523 ( a ) excepts 19 categories of debts from discharge , but according to Judge Chavez- Ruark , the most important language is the first sentence : “ A discharge under section ... 1192 ... of this title does not discharge an individual debtor from any debt .” 2021 Bankr . LEXIS at * 7 ( quoting11 U . S . C . § 523 ( a )) ( emphasis added ). Applying the cannons of statutory constructions and going through the legislative history , Judge Chavez-Ruark ultimately found that when reading § 1192 ( 1 ) in conjunction with § 523 ( a ) the complaint to except the debts from discharge against the corporate subchapter V debtor had to be dismissed . Id . at * 17 .
Conclusion
Judge Chavez-Ruark ’ s decision is well reasoned and appears to correctly apply the discharge provision in § 1192 to corporate debtors .
This article submitted by Jason S . Rigoli , Furr and Cohen , P . A ., 2255 Glades Road , Suite 301E , Boca Raton , FL 33431 , jrigoli @ furrcohen . com
1
11 U . S . C . §§ 101 et seq .
2
Subchapter V , codified at 11 U . S . C . §§ 1181-1195 , was subsequently amended by the Coronavirus Aid , Relief , and Economic Security Act (“ CARES Act “), Pub . L . 116 – 136 , increasing the debt limits for debtors to qualify for relief under subchapter V .
PBCBA BAR BULLETIN 11
Family Law CLE Webinar Highlights
The Family Law CLE Committee of the Palm Beach County Bar Association presented a special webinar on Friday , Februrary 19th titled Financial Affidavits in Family Law Cases : From Intake through Trial . Topics discussed included intake and document collection , best practices and use of technology , income and expenses , judicial panel , ethics and evidentiary hearings .
This webinar included the following speakers from a judicial perspective : Hon . Diane Kirigin , Hon . Laura Laurie , Hon . James Martz , Hon . Maxine Williams , Hon . Tami Zeitenberg .
The webinar also included the following speakers : Eddie Stephens , Esq . | Ward Damon , Heather Moe , CPA , Roderick C . Moe , CPA , Erskine Rogers III , Esq ., Hicks Motto , Nicole Reid , Esq . | Reid Legal Solutions , P . A ., Livia Chaykin , Esq . | Chaykin Law Group , Ana Taitt | Family Law Software .
We would like to thank the following sponsors : Family Law Software , Chaykin Law Group , P . A ., Rehab Pro Assessment and Choose Collaborative .
This course has been approved for 7.5 CLE Credits from the Florida Bar , including 0.5 credits in Ethics and Technology and 7.5 certification credits in Marital and Family Law . Order your copy of this webinar online by visiting https :// cle . palmbeachbar . org or contact Eva Gray via email at egray @ palmbeachbar . org .