All six bankruptcy courts to confront the question have held that debts of corporate debtors in Subchapter V of chapter 11 cannot be nondischargeable under Section 523(a) in nonconsensual plans, according to a special analysis in today’s Rochelle’s Daily Wire.. The Ninth Circuit Bankruptcy Appellate Panel has joined the horde by affirming Bankruptcy Judge Noah G. Hillen of Boise, Idaho, in holding that debts can be nondischargeable in Subchapter V only when the debtor is an individual. The bankruptcy judges and the BAP are aligned against the Fourth Circuit, which held that corporate debtors in Subchapter V may not discharge debts “of the kind” specified in Section 523(a). Cantwell-Cleary Co. v. Cleary Packaging LLC (In re Cleary Packaging LLC), 36 F.4th 509 (4th Cir. June 7, 2022). Bankruptcy Judge Craig A. Gargotta of San Antonio disagreed with Cleary and held that “corporate debtors proceeding under Subchapter V cannot be made defendants in § 523 dischargeability actions.” Avion Funding LLC v. GFS Industries LLC (In re GFS Industries LLC), 647 B.R. 337, 344 (Bankr. W.D. Tex. Nov. 10, 2022). The Fifth Circuit accepted a direct appeal in GFS in April. Briefing should be completed before September.
