How Discharge Works in Sub V
Section 1192 governs the discharge available to Subchapter V debtors. The scope of discharge depends on whether the plan was confirmed consensually (all classes accepted) or nonconsensually (cramdown).
Consensual Plan Discharge
Under Section 1192(a), when all impaired classes accept the plan, the debtor receives a discharge upon plan confirmation. This discharge is similar in scope to the traditional Chapter 11 discharge under Section 1141 -- broad and powerful.
Nonconsensual Plan Discharge
Under Section 1192(b), when at least one impaired class rejected the plan, the debtor receives a discharge after completing all plan payments. Critically, the Section 523(a) exceptions apply to this discharge. This means certain debts survive -- including fraud debts, willful injury debts, and domestic support obligations. Full list of nondischargeable debts.
The 523(a) Issue
This is the most significant difference between Sub V and traditional Chapter 11 for individual debtors. In traditional Chapter 11, individual debtors get a broad discharge that is not subject to most 523(a) exceptions. In Sub V nonconsensual plans, those exceptions apply. This can be outcome-determinative for debtors with fraud claims or other nondischargeable debts.
Practical Implications
If you are a Sub V debtor with debts that might be nondischargeable under 523(a), it is critical to obtain a consensual plan. A consensual plan avoids the 523(a) exceptions entirely. Work with creditors to reach agreement on plan terms -- the stakes are higher in Sub V than in traditional Chapter 11.
Learn about Subchapter V
Subchapter V Guide