CANCELING, TERMINATING, OR BREAKING A COMMERCIAL LEASE IN NEW YORK CITY AND THE GOOD GUY GUARANTY Whether it is crime, quality of life, or economics, many small businesses are looking to terminate or break their commercial leases before they expire.  Those tenants include  retailers, restaurants or office lease tenants.Mr. Van Nieuwerburgh, a Columbia professor, calculates that New York office space on average costs about $16,000 a year per employee. “That’s real money,” he said, “and companies will try to save that”. The article quoting Mr. Nieuwerburgh can be found at https://www.nytimes.com/2022/11/17/business/office-buildings-real-estate-vacancy.html Many tenants looking to terminate their leases have contacted us regarding an early termination of their lease and the sticking point is usually the Good Guy Guaranty that the principal of the business signed. Strategies for dealing with Good Guy Guaranties are discussed below. Jim Shenwick, Esq has represented over 500 tenants in commercial lease negotiations and he has an active bankruptcy and workout law practice. BACKGROUND In New York City, most commercial tenants are corporations or limited liability companies, and these entities are the tenants on the commercial office leases. The principal or principals of the corporation or LLC are almost always required to guarantee the lease in New York City. In New York, there are two types of lease guarantees. The full or complete guarantee of rent payment or the GOOD GUY GUARANTY, which is a specialized form of guarantee that can be limited in duration, if certain conditions enumerated in the GOOD GUY GUARANTY are met.As example, under a  full or complete guarantee, if a tenant fails to make lease payments for 6 months and owes $50,000 for the remaining term of the lease, the Landlord can sue the guarantor for $50,000. A second type of guarantee is known as a Good Guy Guaranty, which limits the principal's exposure under the guarantee. To be a “good guy” means that the tenant vacates the space and delivers possession to the Landlord and the guarantor complies with the terms of the Good Guy Guaranty. Below is an example of how GOOD GUY GUARANTY operates.The GOOD GUY GUARANTY  commonly provides that the guarantor’s financial exposure terminates when the following conditions are met: 1. the tenant sends notice to the Landlord that it is vacating the leased space (the notice required is generally 90 to 120 days), 2. the tenant must be current on  rent, when it sends the notice to the Landlord or when it vacates the space, 3.the space must be left “broom clean” and 4. keys for the office must be delivered to the Landlord. If all four conditions are met, the guarantor is released from liability under the Lease. In the event that the 4 conditions are not met, the guarantor remains liable until the lease expires. If a tenant closes for business or files for bankruptcy, and the conditions for the Good Guy Guaranty are not satisfied, the Landlord can or will sue the guarantor.  The statute of limitations is 6 years.What can the Good Guy Guarantor do?The Good Guy Guarantor can engage in asset protection planning, prior to entering into the GOOD GUY GUARANTY or prior to terminating the lease, provided that that planning is allowed under  New York State law and not a fraudulent conveyance.   The Good Guy Guarantor can file for chapter 7 bankruptcy to discharge the monies owed under the Good Guy Guaranty.The Good Guy Guaranty can engage in workout negotiations with the landlord and/or threaten a bankruptcy filing  orThe Good Guy Guaranty can do nothing and hope that the landlord does not sue the guarantor.The optimal strategy depends on the facts and circumstances of each case and involves a thorough review of the lease, the guarantee and the financial situation of the guarantor. Clients who have guaranteed leases can contact Jim Shenwick, Esq. 212 541 6224 [email protected] to discuss their options.

    In a case that can make a difference in a number of chapter 13 cases, Judge Mark in the Southern District of Florida ruled that when an amended means test is filed in chapter 13, the standard expenses allowed on the means test should be those in effect on the date the amendment is filed, not those in effect when the bankruptcy was filed.  In re Mosley, 2022 Bankr. LEXIS 3219, Case No 19-15907-RAM (Bankr. S.D. Fla., 15 November 2022).  The case came before the court initially on a request by the Debtor to modify the confirmed plan based on an increase in the ongoing payment to their condominium association, which was being paid through the plan.  The order confirming plan had included a provision requiring an obligation to verify ongoing income if income increased by more than 3% over the prior year.  As the debtor had received a $12,000 raise in 2021, which exceeded this figure, she was obligated to verify her income, which including filing an updated means test.  The legal basis of requiring updated income information is 11 U.S.C. §1325(b)(1)(B), which requires a debtor to devote their projected disposable income to unsecured creditors in order to confirm a chapter 13 plan.  This figure is computed by the means test form, which includes a limit on certain expenses per the National Standards and Local Standards published by the IRS.   When the case is filed, these figures are those in effect as of the filing of the case.  However, as those standards change over time, the issue in the case was whether an amended means test would use the limits as of the date of filing, or the limits as adjusted since the case was filed.  Judge Mark found that logic and fairness requires that the courts allow debtors to calculate disposable income per the means test using the allowed expenses as of the date of the amendment, which often includes an increase in allowed expenses for those set by the IRS standards.  The court gave an example of a debtor with a 5% raise in a given year, when the IRS standards increase by 5%, such debtor should not be required to increase the dividend to unsecured creditors.   The decision seems a triumph of logic and common sense in a field where too often the contrary prevails.Michael BarnettMichael Barnett, PA506 N. Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com

Sometimes debtors get buyer's regret after filing a bankruptcy petition.  However, once a bankruptcy petition is filed, it remains on the debtor's credit for ten years. One debtor sought to throw his attorney under the bus by claiming that the bankruptcy filing had never been authorized. Fortunately the debtor's attorney had retained his client's wet signatures and text messages which protected him from the Court's Order to Show Cause. In re Wilson, 2022 Bankr. LEXIS 3378 (Bankr. D. N.J. 11/30/22).  What HappenedOn December 3, 2019, attorney Fred Braverman filed a chapter 13 petition for Charlie Wilson. The case was later dismissed on February 27, 2020 after the debtor failed to prosecute the case.  Several years later, the Debtor was attempting to refinance his mortgage and found out that the bankruptcy filing on his credit report impacted his credit score. After asking his attorney to remove the bankruptcy from the public record, on August 26, 2022, the Debtor wrote a letter to the Court. In the letter, the Debtor alleged that he had told his attorney not to file the bankruptcy case and "was not aware that Atty. Braverman proceeding to file the Chap. 13 case anyway . . . and without our knowledge."The Court was rightfully concerned that a petition might have been filed without the client's authority and issued an Order to Show Cause. Both Attorney Braverman and the Chapter 13 trustee filed responses to the Order to Show Cause. The Court's FindingsThe Court found that the Clerk had sent at least five notices to the Debtor and that none of them had been returned as undeliverable.  The Chapter 13 trustee stated that she had mailed a "welcome letter" advising the debtor of the materials needed for the 341 meeting.  The Court found that Attorney Braverman's response "is more damning." Attorney Braverman protected himself by producing:copies of the wet ink signature pages of the bankruptcy petitiona screen shot of a text message urging him to file the bankruptcy petition to avoid a wage garnishmenta screen shot of a text message thanking him for filing the bankruptcy petitiona hand-written note from the debtor providing information to contact his payroll officea screen shot of a text message on December 27, 2019 indicating that he was having second thoughts about proceeding with the bankruptcy case.Attorney Braverman also testified as to his phone conversations with the Debtor.The Court's RulingThe Court noted that there was a split of opinion as to whether a bankruptcy petition, once filed, can be removed from the record, even if it was filed without permission. The Court noted that this would be an extraordinary remedy. The Court went on to state that "Mr. Wilson's regret, three years after the fact, of the filing the bankruptcy case is not the kind of circumstance that merits an extraordinary remedy." It also stated:It is clear that Mr. Wilson authorized this bankruptcy filing. He sent messages to Mr. Braverman urging him to file the case as soon as possible to stop garnishment of his wages. Mr. Braverman produced a copy of the wet-ink signature page of the petition.  If authorization exists courts usually do not expunge the petition.  Messages from Mr. Wilson regarding changing his mind about bankruptcy were not sent until the 27th of December, 24 days after the bankruptcy commenced and after numerous notices regarding the bankruptcy had been served on Mr. Wilson. Nothing in the Bankruptcy Code allows the court to relieve a filer's remorse. Opinion, pp. 17-18 (cleaned up).  Why It's ImportantToo often, opinions feature attorneys behaving badly. This could have been one of those cases if Attorney Braverman had failed to respond to the Order to Show Cause or if he had failed to preserve the wet signatures.  One case cited by the Court stated that "failure to produce the wet signature on a petition leads to the conclusive presumption that the signature does not exist." In re T.H., 529 B.R. 112, 120 (Bankr. E.D. Va. 2015). Attorney Braverman also protected himself by preserving his text messages with the debtor.  In this case, the record reflects that Attorney Fred Braverman not only complied with his responsibilities under the Bankruptcy Code but practiced good defensive law as well. Other attorneys would do well to follow his example.   I am a little disappointed that the Court let the debtor get off so easily. The debtor's representations to the court were not just erroneous but appear to be fraudulent as well. Even if the Court did not find that sanctions were appropriate it should have cautioned the debtor about the seriousness of  lying to a federal bankruptcy judge. However, even without such an admonishment, if Mr. Wilson files bankruptcy in the future, there is a record of his attempt to mislead the court.  

 Reuters is reporting that U.S. appeals court rejects Biden's bid to revive student debt plan. The article can be found at https://www.reuters.com/world/us/us-appeals-court-rejects-bidens-bid-revive-student-debt-plan-2022-12-01/Jim Shenwick, Esq.

Going from one type of income to another can be hard for disability benefit recipients in Pennsylvania and New Jersey. If you’re finding the transition difficult, our attorneys can help. Surviving on Social Security Disability Insurance (SSDI) income might initially be a challenge for recipients in Pennsylvania and New Jersey. It may take time to become accustomed to a different payment schedule and income, so contact our attorneys if you’re having difficulty. If your monthly payments aren’t enough to support you and your family, you may be able to take on a part-time job. However, the Social Security Administration (SSA) limits how much disability recipients can earn in additional income. If your first check from the SSA doesn’t appear correct, tell our attorneys, and we can contact the SSA so that you start receiving the proper amount. Our team is here to help people in Pennsylvania and New Jersey get the SSDI benefits they deserve. For a free case evaluation with the Pennsylvania and New Jersey disability lawyers at Young, Marr, Mallis & Associates, call today at (215) 515-2954 or (609) 557-3081. How Do You Survive Financially on Disability in Pennsylvania and New Jersey? Adapting to monthly Social Security Disability Insurance checks can be challenging for recipients in Pennsylvania and New Jersey. Our attorneys can help you understand the way these payments are structured and what your monthly payment might be so that you can properly prepare for the change. When people in Pennsylvania and New Jersey are approved for disability benefits, they will receive payments within five months. Depending on the time it took for the Social Security Administration to review your claim, you may be entitled to back pay. This can help SSDI recipients who are without incomes for the time it takes their claims to be reviewed. To easily survive financially while on SSDI payments in Pennsylvania and New Jersey, preparation is key. It’s wise to begin by estimating your monthly benefit. A recipient’s SSDI payment will be based on their earning record. Generally, those who have worked longer qualify for a larger monthly benefit from the SSA. Because SSDI benefit recipients get checks monthly and not bi-monthly, they may have to change their approach to managing their finances. Our Pennsylvania disability lawyers can help you restructure your finances so that your bills and other expenses are paid on time according to your new income schedule. How Long Can You Stay on SSDI in Pennsylvania and New Jersey? In many cases, SSDI benefit recipients can get monthly disability payments until they reach retirement age. However, if you no longer meet the criteria for disability benefits in Pennsylvania and New Jersey, your monthly payments may stop. Social Security Disability Insurance benefits are designed to replace income for those unable to work because of a qualifying illness, injury, or disability. Because of that, many SSDI benefit recipients in Pennsylvania and New Jersey can receive monthly payments until they reach retirement age. At that point, your monthly payments will change from SSDI benefits to retirement benefits. If you run into any issues during this transition, reach out to our New Jersey disability lawyers. If you continue to meet the eligibility criteria for SSDI benefits in Pennsylvania and New Jersey, you can receive them until you reach retirement age. However, if you earn too much in additional income or your condition improves, no longer qualifying you for benefits, your monthly benefits may cease entirely. What if Your Disability Benefit is Not Enough in Pennsylvania or New Jersey? Disability benefits may not be identical to your previous income before you were diagnosed with a qualifying disability, illness, or injury in Pennsylvania or New Jersey. If your monthly benefits are not enough to support you and your family, you may be able to earn additional income up to a point. Those who receive disability benefits in Pennsylvania and New Jersey might find their monthly benefit isn’t enough. In that case, you might be able to take on a part-time job and earn additional income. If you’re considering doing this, be sure to speak with our Quakertown disability lawyers first. The Social Security Administration only allows SSDI benefit recipients to earn a certain amount in additional income each month. In 2023, the substantial gainful activity (SGA) limit for non-blind individuals is $1,470 per month. For blind recipients, the SGA limit in 2023 is $2,460 per month. Earn over the SGA limit in additional income in a month, and the SSA may revoke your benefits. Social Security Disability Insurance benefit recipients with part-time jobs should also be aware of trial work periods (TW Ps). If you earn over $1,050 in additional income in a month, a TWP will automatically be triggered. After nine months of earning over the TWP limit, SSDI benefit recipients in Pennsylvania and New Jersey might lose their benefits. Our attorneys can identify a TWP and take the necessary steps to reinstate your SSDI payments if they’re in jeopardy. Can You Increase Your SSDI Benefit in Pennsylvania or New Jersey? Once the Social Security Administration calculates your monthly Social Security Disability Insurance benefit amount, there’s not much you can do to change it. However, if the SSA makes a mistake, our attorneys can step in to make sure you receive the amount you deserve each month. Monthly SSDI payments are calculated based on a recipient’s earning record. Generally, those close to retirement are the only ones eligible to receive the maximum monthly benefit. In 2023, that amount is $3,627 per month. If you were recently approved for SSDI payments in Pennsylvania or New Jersey, and your first check appears incorrect, reach out to our attorneys. Our Trenton disability lawyers can assess your earning record to determine if the SSA’s calculations are accurate. If they’re not, we can reach out to the SSA so that your monthly benefit is corrected. Call Our Lawyers About Your SSDI Claim Today If you wish to apply for SSDI benefits in Pennsylvania or New Jersey, our attorneys can help. For a free case evaluation with the Mount Laurel disability lawyers at Young, Marr, Mallis & Associates, call today at (215) 515-2954 or (609) 557-3081.

On Nov  17, 2022 the Biden Administration announced a new path to Discharging Student Loan Debt in Bankruptcy, without commencing an Adversary Proceeding (litigation in Bankruptcy Court).  The New York Times has a story on this topic that can be found at https://www.nytimes.com/2022/11/17/your-money/bankruptcy-student-loans.htmlThe new path “outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy,” according to Associate Attorney General Vanita Gupta. Once enacted, the guidance will make it easier for attorneys at the Justice Department and Education Department to identify cases in which Federal student loans may be discharged.The New York Times article states that under the new guidelines, debtors will complete an "attestation form" that the government will use to determine whether a discharge should be recommended for Federal Student Loans. A Debtor will have to demonstrate hardship, such as having expenses that exceed their income or having a mental or physical disability that prevents them from repaying the loan. In such cases, the government lawyers will recommend a full or partial discharge of the debtor's student loans.Student loans can only be discharged under the current system by filing for personal bankruptcy and then filing a lawsuit or adversary proceeding.Adversary proceedings are expensive and difficult to pursue, and according to experts less than 1 percent of personal bankruptcy filers try to discharge their student loans.The attestation form will replace the adversary proceeding for federal student loans, so more debtors will be able to discharge their loans. Shenwick & Associates will close following these developments, and anyone with questions should contact Jim Shenwick, Esq.  [email protected]  212-541-6224

Despite what logic might have told us, the two years following the COVID-19 pandemic had record-low numbers of personal bankruptcy filings. As people tightened their purse strings and relied on government and charity programs to make it through difficult times, fewer families needed the help of the bankruptcy court. However, the trend has turned around+ Read More The post Why is Personal Bankruptcy on the Rise After the Pandemic? appeared first on David M. Siegel.

 The moratorium on federal student loan payments has been extended again by President Biden to June 30, 2023. An article on this topic can be found on cnet at https://www.cnet.com/personal-finance/loans/student-loan-pause-extended-again-heres-when-youll-have-to-start-paying/Jim Shenwick, Esq   212 541 6224   [email protected]

 Distinguishing a precedent from his own district and disagreeing with the Fourth Circuit, Judge Craig Gargotta has ruled that non-dischargeability only applies to human Subchapter V debtors. Adv. No. 22-5052, Avion Funding, LLC v. GFS Industries, LLC (Bankr. W.D. Tex. 11/10/2022).  The decision can be found here. The decision was especially sweet for me personally because the case it distinguished, New Venture Partnership v. JRB Consolidated, Inc. (In re JRB Consolidated, Inc.), 188 B.R. 373, 374 (Bankr. W.D. Tex. 1995), was one that I lost and always thought was wrongly decided. Introduction to Non-Dischargeability of Corporate DebtsUnder 11 U.S.C. Sec. 523(a), there are certain debts which cannot be discharged in a bankruptcy case. Some debts are automatically non-dischargeable, such as domestic support obligations and certain taxes, while other debts must be proven to be non-dischargeable, such as fraud, defalcation in a fiduciary capacity and willful and malicious injury. Usually, it is easy to tell when non-dischargeability applies. Only a human being can receive a discharge in a chapter 7 case, 11 U.S.C. Sec. 727(a)(1) and only individuals can file chapter 13, 11 U.S.C. Sec. 109(e). Since chapters 7 and 13 account for 99% of all bankruptcies, the possible application of non-dischargeability to a corporation or partnership does not come up very often. Nevertheless, it happens enough to parse the statutes and wonder just what Congress was thinking. What makes this issue interesting is how different sections of the Code interact. Let's start with 11 U.S.C. Sec. 523(a). It states that "(a) discharge under (specified specific code sections) does not discharge an individual debtor from any debt" listed in the nineteen subsections which follow. That should make it really clear that only an individual can have a non-dischargeable debt, right? However, when you look at chapter 12, it says that a discharge under chapter 12 does not discharge a debtor from a debt "of a kind specified in specified in section 523(a) of this title." So, does the reference to "of a kind specified in section 523(a)" refer to the nineteen subsections only or does it include the limitation that section 523(a) only applies to individual debtors? In the JRB Consolidated case, Judge Larry Kelly, for whom my Inn of Court is named, concluded that "of a kind" meant the specific types of debts regardless of what debtor they applied to. Now what does Subchapter V say? In 11 U.S.C. Sec. 1192, Congress stated that upon conclusion of a plan, the court shall grant the debtor a discharge of all debts provided in section 1141(d)(1)(A) of this title" except for debts "of the kind specified in section 523(a) of this title."  Section 1141(d)(1)(A) doesn't offer any clarity since it simply refers to pre-petition debts and a few other debts determined as if they were pre-petition debts. However, 11 U.S.C. Sec. 1141(d)(1)(B) specifically says that in a legacy chapter 11 case that non-dischargeability only applies in an individual case.  The Fourth Circuit has recently held that non-dischargeability can apply to a non-human Subchapter V debtor. In re Cleary Packaging, LLC, 36 F.4th 509 (4th Cir. 6/7/2022).So, how did Judge Gargotta approach the problem?Judge Gargotta's InterpretationJudge Gargotta relied substantially on the preamble to section 523(a) to find that non-dischargeability in Subchapter V cases only applied to individuals. He gave three reasons for this conclusion.First, § 1192(2)’s reference to § 523(a) only incorporates the list of nondischargeable debts, without expanding it. In other words, the language of § 1192(2) does not intend to except from discharge any debts that § 523(a) does not already except. Because § 523(a) unequivocally applies only to individuals, the language of § 1192(2) does not empower § 523(a) to cast a wider net than the text of § 523(a) permits. Had Congress included a phrase in § 1192(2) explicitly stating that the list found in § 523(a) applies to all debtors proceeding in Subchapter V, then the interpretation would be straightforward. Congress’s choice not to insert this language is instructive. Moreover, if Congress intended the list of debts to be applicable to corporate debtors, it knew how, because it did so in § 1141(d). Section 1141(d)(6) states: “the confirmation of a plan does not discharge a debtor that is a corporation from any debt (A) of the kind specified in paragraph 2(A) or 2(B) of section 523(a) that is owed to a governmental unit…”(emphasis added). Similarly, § 1141(d)(2) states: “A discharge under this chapter does not discharge a debtor who is an individual from any debt excepted from discharge under section 523 of this title.” (emphasis added). This language is evidence that Congress knew, when it drafted § 1192(2), how to distinguish dischargeability based on the type of debtor. Congress did not make this distinction in § 1192(2). Thus, in order to determine to which debtors § 1192(2) refers, one must look to the language of § 523(a), which unequivocally applies only to individuals. Second, the inclusion of § 1192 in § 523(a) would be rendered meaningless under any other interpretation. When Subchapter V was passed, Congress also amended § 523(a) to add the newly enacted § 1192 to the list of discharge provisions incorporated in the scope of § 523(a)’s discharge exceptions. § 523(a) now reads, “[a] discharge under section…1192…does not discharge an individual debtor…” (emphasis added). Section 1192’s addition is vital to the analysis because it evinces Congress’s intent. Section 1192(2) as written makes § 523 discharge exceptions applicable to “debtors” without regard to whether the debtor is an individual or a corporation. Critically though, had Congress intended § 523(a) exceptions to apply to entities as well, it would be unnecessary to add § 1192 to a statute that plainly applies to individual debtors only. The fact that Congress added § 1192 into § 523 demonstrates that Congress intended § 1192(2) to limit the § 523 exceptions in Subchapter V to individuals only. This conclusion is mandated by the canon of statutory construction against surplusage. When interpreting statutes, courts should “lean in favor of a construction which will render every word operative, rather than one which may make some idle and nugatory.” Antonin Scalia & Bryan  A. Garner, Reading Law: The Interpretation of Legal Texts 69, 174 (2012) (citing Thomas M. Cooley, A Treatise on the Constitutional Limitations Which Rest upon the Legislative Power of the States of the American Union 58 (1868)). Here, interpreting § 523 as excepting from discharge debts of corporate debtors in Subchapter V would be to ignore the import of § 1192 into § 523(a). The Court believes the correct interpretation is one which gives meaning to the amendment to § 523. This position compels the Court to conclude that discharge exceptions found in § 523 apply to an § 1192 discharge, but only as to individual debtors. Third, corporate debtors proceeding under Chapter 11 historically have been immune to dischargeability actions under § 523(a). It is well-settled law in this circuit that the § 523 exceptions to discharge apply only to individuals, not to corporations. See Garrie v. James L. Gray, Inc., 912 F.2d 808, 812 (5th Cir. 1990) (“the ‘willful and malicious injury’ exception to discharge, like all of the exceptions to discharge found in section 523(a), applies only to individual, not corporate debtors”) (citing Yamaha Motor Corp., U.S.A. v. Shadco, Inc., 762 F.2d 668, 670 (8th Cir. 1985)). As this Court itself has explained, it is clear from the language of the Chapter 11 discharge statutes “that corporate debtors in Chapter 11 are not subject to a complaint to determine dischargeability of debt under § 523(a).” New Venture Partnership v. JRB Consolidated, Inc. (In re JRB Consolidated, Inc.), 188 B.R. 373, 374 (Bankr. W.D. Tex. 1995). For Congress to suddenly depart from this well-established principle when it enacted Subchapter V defies reason. It is much more likely, and confirmed by the language used in Subchapter V, that Congress intended to expand, not discontinue, the principle that Chapter 11 corporate debtors are not subject to § 523(a) complaints to determine dischargeability. Because Subchapter V is merely a subchapter to the broader Chapter 11, this is the required result. More compelling, the provisions governing Chapter 11 discharge imply that § 523(a) should not apply to corporate debtors. Section 1141(d)(2) states, “[a] discharge under this chapter does not discharge a debtor who is an individual from any debt excepted from discharge under section 523 of this title.” (emphasis added). Had Congress intended that corporate debtors also be held to the provisions of § 523(a), then clarifying that only individuals under Chapter 11 are liable for § 523 exceptions to dischargeability makes little sense. In sum, the statutory language along with the broader Chapter 11 statutory scheme mandate this Court’s holding that corporate debtors proceeding under Subchapter V cannot be made defendants in § 523 dischargeability actions. Avion’s claims under § 523, therefore, must be dismissed for a lack of legal foundation. Opinion, pp. 8-11.Judge Gargotta was able to distinguish the prior JRB Consolidated decision primarily on the basis that it recognized a difference in the chapter 11 discharge. Judge Gargotta wrote:The Court recognizes the similarities between the language of §§ 1228(a)(2) and 1192(2). Despite the similar language, the Court does not find its decision in this case as inconsistent with the ruling in In re JRB Consolidated. Critical to Judge Kelly’s decision was the difference between the operation of Chapter 11 corporate discharges and Chapter 12 corporate discharges. Judge Kelly pointed out that the provisions of Chapter 11 are narrower, only excepting from discharge 1) a liquidating corporate debtor that would otherwise be denied a discharge under § 727(a) (§ 1141(d)(3)); and 2) individual Chapter 11 debtors who have debts of the kind enumerated in § 523(a) (§ 1141(d)(2)). Given the limited exceptions to discharge in Chapter 11, Judge Kelly observed that “it seems clear from that language that corporate debtors in Chapter 11 are not subject to a complaint to determine dischargeability of debt under § 523(a).” Id. at 374. Because Subchapter V is not its own chapter of bankruptcy, but rather is a subchapter of Chapter 11, Judge Kelly’s analysis regarding Chapter 11 discharges remains applicable to the case here. Furthermore, Judge Kelly recognized the uniqueness of Chapter 12, stating that the broad language of § 1228(a), “would appear to be consistent with the intent of Congress to provide special treatment for certain kinds of debtors otherwise eligible to file for Chapter 12.” Id. In short, because Chapter 12 is only available to a small and specific subset of debtors, Chapter 12 cases have unique considerations that are not present in a Chapter 11 case. Therefore, the Court is not mandated to extend the holding that Chapter 12 corporate debtors are subject to § 523 dischargeability actions into Subchapter V notwithstanding the similar language between §§ 1228(a) and 1192(2). Opinion, p. 13.I have set out the key areas of Judge Gargotta's reasoning because I think he (and his law clerk) do a masterful job of using the canons of statutory interpretation to determine what Congress intended on a subject that Congress probably never thought about. He gets bonus points for citing the Scalia text on statutory interpretation. Congress created this problem by blindly cross-referencing statutes that apply differently in different contexts. The Court can either take the plain meaning approach in a vacuum (as I believe Judge Kelly did in JRB Consolidated) or think about how the statutes work together (as Judge Gargotta did). While other courts may disagree with Judge Gargotta's analysis, they will find it hard to dismiss it as a principled approach to a problem foisted onto the courts by Congress.What Should the Answer Be?Setting aside statutory interpretation and Congressional intent, what should the answer be? I think that dischargeability is a concept uniquely applicable to individual debtors. I start with the proposition that bankruptcy is intended to benefit the "honest but unfortunate" debtor. Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). This introduces a concept of morality that can only apply to human beings and not to artificial entities. The nineteen categories of non-dischargeable debts fall into four broad categories: those which contain an element of moral judgment, those which protect the public fisc, technical exceptions and a grab bag of special interest provisions tacked on over the years. The morality based exceptions include fraud (sec. 523(a)(2)), fraud or defalcation in a fiduciary capacity (sec. 523(a)(4)), willful and malicious injury (sec. 523(a)(6)), death or personal injury caused by drunken driving or boating (sec. 523(a)(9)), federal restitution obligations (sec. 523(a)(13)) and debts for violations of the securities laws (sec. 523(a)(19)).The exceptions aimed at protecting the public fisc include taxes (sec. 523(a)(1)), domestic support obligations (sec. 523(a)(5)), student loans (sec. 523(a)(8)), fraud or defalcation while acting in a fiduciary capacity of a federally insured institution (sec. 523(a)(a)(11)), failure to maintain a commitment to contribute capital to a federally insured institution (sec. 523(a)(11)), and certain fees imposed on prisoners (sec. 523(a)(17)). The exceptions I would describe as technical include debts that are not listed or scheduled (sec. 523(a)(3)) and debts excluded from discharge in a prior case (sec. 523(a)(10)).Of the nineteen categories of non-dischargeable debts there are many which can only apply to an individual, such as domestic support obligations, student loans, restitution, prisoner fines and drunken driving debts. While artificial entities can owe tax debts, they must pay priority claims in full in order to receive a discharge. When you eliminate the debts that could not be incurred by an artificial entity or must be paid by an artificial entity in order to reorganize, the main debts left are a subset of the morality-based exceptions to discharge, such as the fraud claim raised in the Avion Funding case.  Morality is a concept not easily applied to an artificial entity. Purdue Pharma is an example of an entity whose owners operated it in an egregiously immoral manner. However, it was able to reorganize because reorganization promoted the greater good.  If non-dischargeability had applied to that case, there would have been no reorganization since most debts would have escaped discharge. A corporate restructuring is more of a collective maximization of value than it is a vehicle for making moral judgments. Moral judgments, on the other hand, are particularly apropos in the case of an individual receiving a chapter 7 discharge. Beyond the question of whether morality should apply to artificial entities, a kind of morality is baked into the Code in other areas applicable to artificial entities. The good faith requirement of 11 U.S.C. Sec. 1129(a)(3) is designed to ensure that the bankruptcy process is not used for improper purposes. The priority given to taxes, employee wages and customer deposits all include an element of moral judgment. While the existing laws are rather murky, if Congress were writing on a clean slate, it should state that dischargeability only applies to human debtors.Disclaimer:  Given that there are two viable alternatives for deciding whether non-dischargeability applies to a corporate debtor, I reserve the right to argue whichever position benefits my client. 

 Governor Hochshul signed a bill on Wednesday November 23, 2022, prohibiting healthcare providers from collecting wages or liening patients' homes to satisfy medical debts. An article about the bill can be found at https://www.mytwintiers.com/news-cat/state-news/hochul-signs-bill-to-protect-new-yorkers-with-medical-debt/If a creditor wishes to collect a debt in New York, they must sue the debtor, obtain a judgment, and then enforce the judgment. Under New York law a  judgment is good for 20 years. Creditors who attempt to enforce judgments generally do three things: 1.  Lien and levy  on a debtors checking account or brokerage account, 2. Docketing the judgment against the debtor’s house and foreclosing on the judgment and 3. Wage garnishment, a legal procedure in which a person's earnings (10%) are required by court order to be withheld by an employer, and paid to a creditor in satisfaction  of a debt.With the new law signed by the governor, medical creditors will no longer be able to garnish wages or docket judgments against a debtor's house in order to collect on those judgments. If you have any questions about the enforcement of judgments, please contact Jim Shenwick, Esq at [email protected] or  at 212-541-6224.