Pub. 1 2021 Issue 1

6 | The Show-Me Banker Magazine LEGAL EAGLE SPOTLIGHT Ryan C. Hardy Spencer Fane LLP MISSOURI BANKRUPTCY COURT HOLDS DEBTOR MUST BE CURRENTLY ENGAGED IN COMMERCIAL OR BUSINESS ACTIVITIES TO BE ELIGIBLE TO MAKE SUBCHAPTER V ELECTION In In re Thurmon, the Bankruptcy Court for the Western District of Missouri held that debtors who had ceased operation of their business and sold its assets pre-peti- tion were not “engaged in commercial or business activities,” and therefore could not proceed under new subchapter V of Chapter 11. Despite its order, the Court nonetheless signaled its willingness to confirm the debtors’ subchapter V plan with a modification, although the debtor had never sought approval of or distribut- ed a disclosure statement as required for non-subchapter V Chapter 11 debtors. The Court’s main holding — that a debtor must be currently engaged in business or commercial activities to be eligible to proceed under subchapter V — rested on a plain reading analysis. The Court noted that the phrase “engaged in” is used in other parts of the Code and has been construed, at least implicitly, to mean “currently engaged in.” Additionally, a native English speaker typically would understand “en- gaged in” to mean “currently engaged in” rather than “currently or formerly engaged in.” In so holding, the Court acknowledged that its determination was opposite the holdings of each reported case considering the issue. Practitioners should reasonably expect that this dispute will play out in bankruptcy courts across the country, particularly since it was the Office of the United States Trustee that raised the issue here; we can reasonably expect the UST to do so elsewhere as well. The UST argued that since the debt- ors were not eligible to proceed under “The Court first observed that, by statute, a debtor may proceed under subchapter V unless and until the Court determines ineligibility.”