Reis v. Garvin (In re Reis)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 11 months 4 weeks ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- No. 24-4201 (9th Circuit, Feb 26,2025) Not Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the Ninth Circuit affirmed a bankruptcy court's decision that an individual debtor was ineligible to proceed in bankruptcy under Subchapter V of chapter 11. Because at least half of a debtor's undisputed debt must arise from their commercial or business activities to be eligible for relief under Subchapter V, and the debtor did not show that her medical school student loan debt arose from such activities, the debtor did not qualify.
- Procedural context:
- The Bankruptcy Code does not define the phrase “commercial or business activities.” The Ninth Circuit assessed whether Debtor's student loan debt arose from “commercial or business activities” by "looking at the totality of the circumstances." The Ninth Circuit also stated in a footnote: "We assume without deciding that debts incurred before opening a business, including student loan debt, could qualify as debt arising from commercial or business activities."
- Facts:
- Debtor Laura T. Reis filed a bankruptcy petition in the U.S. Bankruptcy Court for the District of Idaho in November 2022 and elected to proceed under Subchapter V. To be eligible for Subchapter V at that time, Debtor had to be "(1) a person (2) engaged in commercial or business activities (3) with undisputed debts, both secured and unsecured, that do not exceed $7.5 million, and (4) at least half of that debt arose from the debtor’s 'commercial or business activities.'" Debtor incurred prepetition medical school student loan debts that constituted almost 60 percent of her scheduled total liabilities. Debtor accrued these debts more than a decade before she owned and operated her own medical practice. The Office of the United States Trustee objected to Debtor's eligibility to proceed under Subchapter V based on the fourth eligibility requirement. Debtor argued she was eligible "because her medical degree was a required step in order to own and operate a medical practice [and so] the student loan debt she incurred in pursuit of that degree necessarily 'arose from' her commercial or business activities." The bankruptcy court disagreed and granted the U.S. Trustee's objection. The U.S. District Court for the District of Idaho affirmed, and Debtor took a second appeal to the Ninth Circuit.
- Judge(s):
- GOULD, NGUYEN, and BENNETT
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