Section 9.80 Discharge of Debtor Upon Confirmation

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

4. (§9.80) Discharge of Debtor Upon Confirmation

Except as provided in the plan, the confirmation order of 11 U.S.C. § 1141(d)(2) or (3) discharges the debtor from any debt that arose before the confirmation date and any claims arising from rejection of an executory contract or unexpired lease under 11 U.S.C. § 502(g), from recovery of certain property by the debtor under § 502(h), and from certain postpetition taxes under § 502(i), regardless of whether:

· a proof of claim was filed or deemed filed under 11 U.S.C. § 501;

· the claim is allowed under § 502; or

· the holder has accepted the plan.

Section 1141(d)(1)(A).

In a case in which the debtor is an individual, unless the court orders otherwise, discharge does not occur upon confirmation of the plan, but upon completion of all payments under the plan. Section 1141(d)(5)(A). A debtor who has not completed payments under the plan may nonetheless obtain a discharge under § 1141(d)(5)(B) if the amount paid under the plan is at least as much as what creditors would have received had the debtor been liquidated under Chapter 7 and modification of the plan is not practicable. This provision parallels a similar provision in Chapter 13 for a hardship discharge, but omits the requirement that the court find that the debtor’s failure to complete the payments was because of circumstances for which the debtor should not justly be held accountable. An awkwardly worded, incomplete sentence added to the Bankruptcy Code by the BAPCPA apparently requires the court to either delay or deny a discharge if there is pending against the debtor any proceeding in which the debtor might be found guilty of a felony of the kind described in 11 U.S.C. § 522(q)(1)(A) (punishable by confinement of one year or more) indicating that the filing of the case was an abuse of the provisions of Title 11 or may be liable for a debt of the kind described in § 522(q)(1)(B) (certain securities law violations, Racketeer Influenced and Corrupt Organizations Act, Pub. L. No. 91-452, 84 Stat. 941, violations, or any criminal act, intentional tort, or willful or reckless misconduct causing serious physical injury or death to another individual). Section 1141(d)(5)(C).

But confirmation does not discharge:

· an individual debtor from any debt excepted from discharge under 11 U.S.C. § 523, § 1141(d)(2); or

· the debtor if:

(A) the plan provides for the liquidation of all or substantially all of the property of the estate;

(B) the debtor does not engage in business after consummation of the plan; and

(C) the debtor would be denied a discharge under section 727(a) . . . if the case were a [liquidation] case under chapter 7 of this title.

Section 1141(d)(3); see Norwest Bank Neb., N.A. v. Tveten, 848 F.2d 871 (8^th Cir. 1988) (debtor with fraudulent intent denied discharge); accord, In re Armstrong, 931 F.2d 1233 (8^th Cir. 1991).

In addition, in accordance with revisions enacted in 2005, the confirmation of a plan of a corporate debtor does not discharge such a debtor from debts for false pretenses, false representations, actual fraud, or use of a false financial statement if the debt is owed to a domestic governmental unit or an individual with a claim under Subchapter III of Chapter 37 of Title 31 (false claims) or a similar state law. Debts for tax or customs duties with respect to which the debtor made a fraudulent return or willfully attempted to evade the tax are also nondischargeable in a corporate case. Section 1141(d)(6).

Although an individual debtor is not discharged from claims of the kind described in § 523(a), a plan of reorganization confirmed by an individual debtor may nonetheless contain procedures to which holders of nondischargeable claims are subject. For example, in In re Martin, 150 B.R. 43 (Bankr. S.D. Cal. 1993), the court prevented the IRS from taking postpetition action on admittedly nondischargeable tax claims against a debtor as a result of the failure by the Internal Revenue Service to comply with certain procedures contained in the plan for the filing of amended and supplemental proofs of claim. Similarly, in In re Mercado, 124 B.R. 799 (Bankr. C.D. Cal. 1991), the court approved a plan of reorganization containing provisions enjoining the holders of nondischargeable claims from attempting to collect unless the debtors defaulted on their obligations under...