The Oklahoma Bar Journal December 2023

the percentage of confirmed plans, half the percentage of dismissals, as well as a shorter time to con firmation. Furthermore, of those Sub V cases with confirmed plans, nearly 70% were consensual. For the foregoing reasons, the Sub V provisions of Chapter 11 have made reorganization a real option for many small businesses that previously had no choice but to close their doors. If you have a client in need of insolvency counseling, contact a restructuring professional to determine what options are most beneficial. shareholder in Crowe & Dunlevy’s Dallas office and serves as co-chair of the Bankruptcy & Creditor’s Rights Practice Group. She assists companies and individuals in restructuring matters including Chapter 11 reorganizations, bankruptcy-related litigation and appeals as well as out of court restructuring. ENDNOTES 1. “Commercial Chapter 11 Filings Increased 68 Percent in the First Half of 2023,” Epiq (July 3, 2023), https://bit.ly/3u7xcxc; “U.S. Bankruptcy Courts—Business and Nonbusiness Cases Commenced, by Chapter of the Bankruptcy Code, During the 12-Month Period Ending June 30, 2023,” U.S. Courts, https://bit.ly/3R046co (last accessed Sept. 1, 2023). 2. 11 U.S.C. §1182(1)(A). 3. The Bankruptcy Threshold Adjustment and Technical Corrections Act reinstated the $7.5 million debt limit for small businesses wanting to file Chapter 11 under the Sub V election. This more generous limit will be sunset on June 21, 2024, without further action. 4. 11 U.S.C. §1182(1)(A). 5. 11 U.S.C. §1182(1)(B)(ii)-(iii). 6. 11 U.S.C. §1182(1)(A). 7. In re Free Speech Sys., LLC , 649 B.R. 729 (Bankr. S.D. Tex. 2023). 8. 11 U.S.C. §1183. 9. 11 U.S.C. §1183(b)(7). ABOUT THE AUTHOR Christina “Crissie” W. Stephenson is a

CAN DISCHARGE BE CHALLENGED?

10. 11 U.S.C. §326(a), 330(a). 11. 28 U.S.C. §1930(a)(6)(A). 12. 11 U.S.C. §1102. 13. 11 U.S.C. §1102(a)(3). 14. 11 U.S.C. §1189(b). 15. 11 U.S.C. §1190(a)(1). 16. 11 U.S.C. §1189(a). 17. 11 U.S.C. §1129(b)(2)(B)(ii). 18. 11 U.S.C. §1191(b). 19. 11 U.S.C. §1129(a)(10). 20. 11 U.S.C. §1191(c). 21. 11 U.S.C. §1191(d)(2). 22. 11 U.S.C. §1191(c)(2).

Section 1192(2) provides that debts “of the kind specified in section 523(a) of this title” may not be discharged. 25 While Section 523 applies only to individual debtors, Section 1192(2) applies to both indi viduals and businesses. Because both individuals and businesses can file Chapter 11 under Sub V, this has caused some controversy. For example, while the 4th Circuit has held that Section 1192(2) makes Section 523(a) applicable to all Sub V debtors, 26 various other district courts (and one bankruptcy appel late panel) have ruled that Section 523(a) does not apply to corporate Sub V debtors. 27 This issue is cur rently on appeal at the 5th Circuit awaiting a ruling. 28 The majority of courts that have ruled on this issue have ruled that a corporate Sub V debtor’s discharge may not be chal lenged under Section 523(a). CAN ADMINISTRATIVE CLAIMS BE PAID OVER TIME? If a Sub V plan is confirmed under Section 1191(b) (a non- consensual plan), a debtor can pay administrative claims over time. This can be an extraordinary advantage over traditional Chapter 11 plans, where administrative claims, unless otherwise agreed to, must be paid in full on or before the effective date of the plan. 29 Not only do Sub V cases provide strategic legal advantages for small businesses as described herein, they are also statistically more successful than traditional Chapter 11 cases. 30 When compared to traditional Chapter 11 cases over a two-year period, Sub V cases had double ARE SUB V CASES MORE SUCCESSFUL?

23. 11 U.S.C. §1195. 24. 11 U.S.C. §327. 25. 11 U.S.C. §1192(2). 26. In re Cleary Packaging, LLC , 36 F.4th 509 (4th Cir. 2022). 27. In re Hall , No. 3:22-AP-00062-BAJ, 2023 WL 2927164 (Bankr. M.D. Fla. Apr. 13, 2023); In re 2 Monkey Trading, LLC , No. 6:22-BK-04099-TPG, 2023 WL 3145124 (Bankr. M.D. Fla. Apr. 28, 2023); In re Lapeer Aviation, Inc. , No. 21-31500-JDA, 2022 WL 1110072, at *2 (Bankr. E.D. Mich. Apr. 13, 2022); In re Rtech Fabrications, LLC , 635 B.R. 559, 564 (Bankr. D. Idaho 2021); In re Satellite Rests. Inc. Crabcake Factory USA , 626 B.R. 871, 876 (Bankr. D. Md. 2021); In re Off-Spec Sols., LLC , 651 B.R. 862, 864 (B.A.P. 9th Cir. 2023). 28. In re GFS Indus., LLC , 647 B.R. 337 (Bankr. W.D. Tex. 2022), motion to certify appeal granted , No. 22-50403-CAG, 2023 WL 1768414 (Bankr. W.D. Tex. Feb. 3, 2023). 29. 11 U.S.C. §1129(a)(9). 30. Chapter 11 Subchapter V Statistical Summary , DOJ: U.S. Trustee Program, https://bit.ly/3MEeJi8 (last accessed Sept. 1, 2023).

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

DECEMBER 2023 | 9

THE OKLAHOMA BAR JOURNAL