4th Circle Says Co. can’t slip injury claims into Subchapter V

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By Rick Archer (June 7, 2022, 8:45 PM EDT) – The Fourth Circuit has found that companies cannot use Subchapter V small business bankruptcy filings to evade court judgments for willful injury, saying that unlike Chapter 11, the subchapter makes no distinctions between individuals and corporations.

In an opinion filed Tuesday, the panel found that while the Bankruptcy Code allows a corporation to void court judgments for willful injury in a standard Chapter 11, it cannot in a small business case, saying that Congress made the change deliberately to balance the more debtor-friendly aspects of Subchapter V.

“Distinguishing between individuals and corporations for the way in which Subchapter V is applied would not be…

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