Nondischargeability of Corporate Debt in Subchapter V: Disrupting Debtor-Creditor Bargaining Power
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
- work Practice Area
Bankruptcy
- event Date
Wednesday, April 12, 2023
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE webinar will steer counsel through the uncertain law regarding whether, when a plan is confirmed under Bankruptcy Code Section 1191(b), Subchapter V of Chapter 11 affords corporate debtors a broader discharge than individual debtors would receive, and how the answer impacts debtor and creditor bargaining power and strategies. After thoughtfully critiquing Cantwell-Cleary Co. Inc. v. Cleary Packaging L.L.C. (In re Cleary Packaging L.L.C.),36 F.4th 509 (4th Cir. 2022), the panel will explore the challenges of proceeding against entities under Section 523(a) and strategies for counsel on all sides of the issues.
Bankruptcy Code Section 1192(2) of Subchapter V provides that a plan confirmed under Section 1191(b) does not discharge the debtor from debts of the kind specified in Section 523(a), making no reference to the type of debtor. Section 523(a), however, famously applies only to individual debtors, not entities. Courts are trying to decide if Section 1192(2) applies to entities or just individuals.
Nothing is completely settled under Subchapter V. A significant shift in Chapter 11 jurisprudence, In re Cleary ostensibly held that fairness and equity, not necessarily the statutory language, required that Section 1192(2)'s discharge exceptions apply to both individual and entity debtors. Other courts, however, have refused to follow what they contend is flawed reasoning to achieve a satisfying result.
Fact sensitive and often alleging fraud, dischargeability litigation is expensive, difficult to settle, and usually renders judgments uninsurable. While creditors might see Cleary as creating leverage, others may see a threat to the viability of Subchapter V.
Listen as our panel of trailblazing bankruptcy attorneys discusses the intersection of Subchapter V and Section 523, and what strategies are needed to maximize both the debtor's fresh start and creditor recovery.
- The interplay between Sections 1192 and 523
- Relevant case law and analysis
- Critique of Cleary
- Proceedings against entities under Section 523: special problems
- Enforcing a judgment of non-dischargeability
The panel will review these and other key issues:
- Does footnote 2 of Clearly resolve or gloss over critical statutory language differences?
- How would an objecting creditor establish the requisite intent for certain types of Section 523(a) allegations? Who are the debtor's agents for these purposes?
- Does Cleary attempt to solve a problem that is already solved by other sections of the Bankruptcy Code, such as Section 510?
- When can a non-dischargeable debt be collected and from what assets may it be collected?
