Summary:
Carolina Sleep Shoppe, LLC filed a Subchapter V Chapter 11 in April 2024. Despite expectations of a consensual plan, no creditor cast a ballot, resulting in a non-consensual cramdown confirmation under § 1191(b). The Debtor proceeded to substantially consummate the plan, pay all administrative expenses, and begin distributions—particularly to its only secured creditor, the SBA.
Seeking case closure prior to discharge, the Debtor moved under 11 U.S.C. § 350 and Fed. R. Bankr. P. 3022. The Bankruptcy Administrator objected, citing post-confirmation oversight concerns, costs to creditors if the case had to be reopened, and general policy against closing non-consensual Subchapter V cases pre-discharge.
Judge Edwards,ruled in favor of the Debtor, holding that:
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The Subchapter V Trustee had been discharged under the terms of the confirmed Plan and substantial consummation.
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The estate was “fully administered” under the Rule 3022 factors—even though no discharge had yet been entered.
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There is no blanket rule that cases with non-consensual plans must remain open until discharge.
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Closing a case pre-discharge is permissible and often practical, as reopening remains available under § 350(b).
Importantly, the court noted that the discharge of a Subchapter V Trustee in a non-consensual plan must be evidenced via a separate Report of No Distribution, and future closure requests should be made by motion—not embedded in a final report.
Commentary:
This case presents a pivotal and pragmatic clarification on Subchapter V practice in the Western District of North Carolina: a non-consensually confirmed Subchapter V can, and sometimes should, be closed before the plan term ends. Judge Edwards's opinion decisively dispels the misconception that § 1191(b) plans require cases to remain open for their entire duration.
While the Bankruptcy Administrator raised valid concerns about estate oversight and creditor protections, the Court gave credence to what many Chapter 11 practitioners already know—post-confirmation oversight often imposes unnecessary burdens without meaningful benefit, particularly when creditor engagement is nonexistent (as was the case here). In a nod to judicial economy and administrative pragmatism, the court emphasized flexibility in interpreting "fully administered" and prioritized plan performance over bureaucratic inertia.
This ruling may prompt other districts to reconsider rigid closure policies in Subchapter V cases, especially where creditor silence—not opposition—drives cramdown. It also highlights the evolving role of the Subchapter V Trustee post-confirmation and underscores the importance of tailoring plan provisions to explicitly govern vesting and trustee discharge.
Commentary:
While Chapter 13 cases obviously remain open while plan payments and disbursements continue to be made, it is not uncommon for a case to remain open for extended periods of time after plan completion. A frequent example involves the Notice of Final Cure and Motions to Declare Current in mortgage cases. The recognition that there may be burdens for a debtor, whether a consumer in Chapter 13 or a business in a Sub V, in remaining in an open case is important as that impacts, among other things, the abandonment of assets under §554, any restrictions (from either the bankruptcy court or lenders) the debtor may have on obtaining new credit, and also the real psychological desire of being free from bankruptcy.
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