Consensual Discharge -- Upon Confirmation
When all impaired classes accept the plan, the debtor receives a discharge upon confirmation under Section 1191(a). This is the most favorable outcome:
- Timing: Immediate upon the confirmation order
- Scope: Broad -- standard Chapter 11 discharge scope
- Section 523(a) exceptions: Do not apply (for entities; limited application for individuals)
This is the gold standard. Consensual confirmation gives the debtor an immediate, broad discharge -- the best possible outcome in Subchapter V.
Cramdown Discharge -- After Plan Completion
When confirmation is achieved through cramdown under Section 1191(b), the discharge is delayed and narrowed:
- Timing: After the debtor completes all plan payments (3-5 years)
- Scope: Narrower -- Section 523(a) exceptions apply
- Nondischargeable debts: Fraud, willful injury, domestic support, taxes, student loans, DUI injuries
For individual debtors: The cramdown discharge is significantly less valuable because creditors can pursue discharge exception litigation for any of the Section 523(a) categories. This risk does not exist with consensual confirmation.
Completing Plan Payments
For cramdown cases, the debtor must satisfy all payment obligations under the plan before the discharge enters. The Subchapter V trustee monitors compliance and files a report when payments are complete.
Requirements before discharge:
- Complete all plan payments
- Certify that all domestic support obligations are current
- File all required operating reports
- Certify completion of debtor education (for individuals)
The Hardship Discharge Question
Chapter 13 provides a "hardship discharge" under Section 1328(b) for debtors who cannot complete plan payments due to circumstances beyond their control. Whether this provision applies in Subchapter V is an open legal question.
Arguments in favor: Subchapter V incorporates many Chapter 13 concepts. The hardship discharge fills a gap that Congress may not have intended to leave.
Arguments against: The statutory text of Section 1192 does not reference Section 1328(b). Subchapter V has its own discharge provisions that do not include a hardship option.
Unsettled law: If you are a Subchapter V debtor struggling to complete plan payments, consult an attorney familiar with the current state of the law in your circuit.
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