Title
The Application of 11 U.S.C. § 523(a) to Subchapter V Corporate Debtors Under 11 U.S.C. § 1192(2)
Document Type
Research Memorandum
Publication Date
2023
Abstract
(Excerpt)
Under title 11 of the United States Code (the “Bankruptcy Code”), a debtor can receive a fresh start through a broad discharge of its debts. The general availability of a discharge is limited by section 523(a). Section 523(a) provides that certain types of debts of an individual are excepted from discharge. Section 1192 applies these exceptions in certain small business bankruptcy cases.
In 2019, Congress created Subchapter V of the Bankruptcy Code with the passing of the Small Business Reorganization Act (“SBRA”). The SBRA added provisions to Chapter 11 which apply to small business debtors. Small business debtors, as defined by the Bankruptcy Code, include persons, partnerships, or corporations engaged in commercial or business activities who meet a specific debt limit. Since its addition to the Bankruptcy Code, courts have been tasked with interpreting how the dischargeability exceptions under section 523(a) apply to Subchapter V debtors.
This article explores whether the exceptions to dischargeability that were incorporated into section 1192(2) from section 523(a) apply only to individual debtors or if they also extend to corporate debtors. Part I provides a textual analysis of statutory text governing dischargeability exceptions under Chapter 11, Subchapter V. Part II examines the two different interpretations courts have endorsed regarding (i) statutory construction, (ii) applicability of a Chapter 12 discharge exception analogy, and (iii) fairness and policy considerations, when deciding whether section 523(a) discharge exceptions extend to corporate debtors.