When Does A Subchapter V Discharge Happen? (In re Satellite Restaurants)

By Donald L. Swanson

Here are opposing Subchapter V discharge rules—based on whether the plan is confirmed consensually or non-consensually:

1. Consensual Confirmation.  “If a plan is consensual and confirmed under Section 1191(a), the debtor receives a discharge under Section 1141(d)”; but
2. Non-Consensual Confirmation.  If a plan is non-consensual and confirmed under Section 1191(b), “the debtor receives a discharge under Section 1192. See 11 U.S.C. § 1181(c).”

Gaske v. Satellite Restaurants, Inc. (In re Restaurants, Inc.), Adv. No. 21-00012, Maryland Bankruptcy Court (decided 3/19/2019, Doc. 21), at Fn. 3.

Timing Distinction

11 U.S.C. § 1141 is the usual discharge statute for all Chapter 11 cases; while 11 U.S.C. § 1192(b) is the special discharge statute for Subchapter V cases.

A primary distinction between discharges under § 1141(b) and § 1192(b) is timing:

• Upon Confirmation.  Under § 1141(d)(1), “the confirmation of a plan . . . discharges the debtor”; but
• After Completion of Payments.  Under § 1192, “the court shall grant the debtor a discharge” only “after completion by the debtor of all payments” under the plan.

Conclusion

Achieving a consensual confirmation is an important debtor goal in every Subchapter V case.  Obtaining an immediate discharge is one of the reasons why that goal is important.

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