Lawrence Kotler, left, and Elisa Hyder, right, of Duane Morris. Courtesy photos

Fifth Circuit Sides With Fourth Circuit and Rules That Discharge Exceptions Apply to Corporate Subchapter V Debtors

In the case of Avion Funding v. GFS Industries (In re GFS Industries), the U.S. Court of Appeals for the Fifth Circuit held that corporate debtors that elect to proceed under Subchapter V of Chapter 11 are, pursuant to Section 1192 of the Bankruptcy Code, subject to the discharge exceptions set forth in Section 523 of the Bankruptcy Code.

September 27, 2024 at 12:13 PM

7 minute read

Bankruptcy

By Lawrence J. Kotler

By Elisa Hyder

In the case of Avion Funding v. GFS Industries (In re GFS Industries), 99 F.4th 223 (5th Cir. 2024), the U.S. Court of Appeals for the Fifth Circuit held that corporate debtors that elect to proceed under Subchapter V of Chapter 11 are, pursuant to Section 1192 of the Bankruptcy Code, subject to the discharge exceptions set forth in Section 523 of the Bankruptcy Code. In so holding, the GFS court agreed with the U.S. Court of Appeals for the Fourth Circuit, the only other circuit court to address this issue, in the case of Cantwell-Cleary v. Cleary Packaging (In re Cleary Packaging), 36 F.4th 509 (4th Cir. 2022).

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