All posts tagged Judge Wayne Johnson

Corporate Fraud is Discharged in Chapter 11

I found out the hard way that corporate fraud is discharged in chapter 11 (provided of course that a plan is confirmed that is not a liquidating plan).  I say the hard way because I advised Judge Wayne Johnson recently that I was going to file a non-dischargeability complaint in the corporate chapter 11 and he said something like, “you can’t do that,” and I responded something like, “Oh yes I can.”  He then read me sections 523 and 1141 and I backed off and promised to review the code before filing anything.   The issue came up last week when someone posted the same question on a listserve and Prof. Mark Scarberry from Pepperdine responded explaining the reasoning behind the rule.

Mark wrote:

Section 523(a) applies, by its terms, only to debtors who are individuals (flesh-and-blood human beings). Section 523(a) refers to section 1141 and thus applies to chapter 11 discharges of individuals. Section 1141(d)(2) confirms that result by providing that the chapter 11 discharge does not discharge an individual debtor from debts that are excepted from the discharge by section 523.

Section 727 applies only in chapter 7 cases. See section 103(b). (Note that the exceptions from discharge in section 523(a) are irrelevant in a chapter 7 case where the debtor is not an individual, because section 727(a)(1) prevents any such non-individual debtor from receiving a chapter 7 discharge.)

Here is my best understanding of the policy behind the non-applicability of section 523(a) to non-individual chapter 11 cases.

Read more…

In re Taylor — District Court Reverses Judge Wayne Johnson and Rules “Chapter 13 debtor’s right to convert to Chapter 7 is absolute.”

In re Taylor — Case No. EDCV 11-1879-GHK

Appeal from Bankruptcy Court’s (Judge Johnson, Riverside) dismissal of Chapter 13 case at the confirmation hearing “for failure to make payments and….timely file a secured debt payment history declaration” even though Debtors had filed their Notice of Conversion from Chapter 13 to Chapter 7 the day before the confirmation hearing.

The District Court reversed holding that “a Chapter 13 debtor’s right to convert to Chapter 7 is absolute…the Bankruptcy Court erred in failing to give effect to Appellants’ Notice of Conversion and subsequently dismissing Appellants’ Chapter 13 case.” Case was remanded to the Bankruptcy Court.

Read the decision, written by Hon. George H. King, here.  I sat next to Judge King at Federal Bar Association program a couple of months ago (Dean Chemerinsky’s annual Supreme Court Review)!