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Summarizing by Shane Ramsey

In re: RS AIR, LLC

Case Type:
Case Status:
NC-23-1008-FSG (9th Circuit, Jun 02,2023) Published
The 9th Circuit BAP affirmed the Bankruptcy Court and held that the collection of discharged debt from debtor’s alter ego does not violate discharge injunction.
Procedural context:
The debtor filed a filed a motion for contempt against his creditor for violation of the discharge injunction under § 524(a)(2). It argued that the state court complaint’s alter ego claim impermissibly sought to recover a discharged debt because the alter ego allegation meant that “the Defendants are all one and the same.” The creditor opposed the Contempt Motion. It argued that an earlier BAP decision had stated that the discharge injunction did not preclude the state court complaint. It also contended that the discharge injunction does not apply to non-debtors and that the discharge could not discharge the alter ego claims against the related parties in the state court complaint. After a hearing, the bankruptcy court issued its order denying the Contempt Motion.
The creditor filed suit against the debtor in state court for breach of contract. Afterwards, the debtor filed a petition under Chapter 11. The creditors then filed a new complaint against the debtor's owner and related entities, without the debtor as a defendant. Shortly thereafter, the debtor received a discharge.
FARIS, SPRAKER, and GAN, Bankruptcy Judges.

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