“A discharge under section 727, 1141, 1192 [Subchapter V], 1228(a), 1228(b), or 1328(b) of this title does not dischargean individual debtor from any debt— . . .”

11 U.S.C. § 523(a) (emphasis added).

Bankruptcy courts applying the foregoing language in the early days of Subchapter V found such language to be clear and unambiguous: that only “an individual debtor” is affected.

A new, bipartisan bankruptcy bill in the U.S. Senate purports, according to an official document, to:

Question: Can a retirement fund organized under Canadian law qualify for a state law exemption requiring that it “qualify as a retirement plan” under the Internal Revenue Code?

This question gets all the way to the U.S. Seventh Circuit Court of appeals, which issues a “No” answer, in Green v. Leibowitz, Case No. 23-2841 (decided 7/16/2024).

The general rule is that claims of the bankruptcy estate against third parties (e.g., preference claims and tort claims) can be sold to third parties in a § 363 sale.[Fn. 1]

However, a recent opinion from the U.S. Fifth Circuit Court of Appeals discusses whether a state’s champerty law impairs a § 363 sale.[Fn. 2] 

Four U.S. Supreme Court justices (Kagan, Kavanaugh, Roberts and Sotomayor) provide the following summary of their Purdue Pharmadissent in the Purdue Pharma case.

Wrong & Devastating

Today’s five-justice majority opinion is wrong on the law and devastating for more than 100,000 opioid victims and their families:

11 U.S.C. § 1191(c)(2) provides (emphasis added):

• “(c) . . . the condition that a plan be fair and equitable . . . includes . . . (2) . . . all of the projected disposable income of the debtor to be received in the 3-year period, or such longer period not to exceed 5 years as the court may fix, . . . will be applied to make payments under the plan.”

There is little-to-no guidance in the Bankruptcy Code on what “as the court may fix” might mean. So, that meaning is left to the courts to decide.

Under 11 U.S.C. § 727(a)(2), an individual debtor may be denied a discharge, in its entirely, for making a transfer “with intent to hinder, delay, or defraud” a creditor or the trustee.

On April 17, 2023, the Bankruptcy Court for Eastern Michigan ruled:

A “silent” creditor in Subchapter V is one who does not vote on the debtor’s plan and does not object to that plan. The “silent” creditor is a problem for Subchapter V cases.

The Problem

Here’s the problem:

Here are a couple discharge-related bankruptcy questions I’ve heard of late, along with an answer.

Question 1. Why are individuals, but not corporations, eligible for a Chapter 7 discharge?

• §727(a)(1) says, “the court shall grant the debtor a discharge, unless—(1) the debtor is not an individual” (emphasis added).

Question 2. Why are individuals, but not corporations, subject to § 523(a) discharge exceptions in Chapter 11?

Can non-compete and confidentiality protections in a rejected franchise agreement be discharged in bankruptcy?

The answer is, “No,” according to In re Empower Central Michigan, Inc.[Fn. 1]

Facts

Debtor is an automotive repair shop.

Debtor operates under a Franchise Agreement with Autolab Franchising, LLC. The Franchise Agreement has a non-compete provision, and there is a separate-but-related confidentiality agreement.