Tom C. Clark

“ Section 12 proceedings, which were primarily adaptable for use by business entities, were disproportionately expensive in view of the small sums ordinarily involved in wage-earner cases; they lacked flexibility;and they did not provide for jurisdiction of the court subsequent to confirmation. Other provisions of the Act had similar disadvantages. Faced with inadequate relief under the federal bankruptcy laws and often with little protection from creditors under state law, the only course usually open to the wage-earning debtor was straight bankruptcy. ”

“ It is with this underlying policy in mind that we turn to a consideration of the problem posed here, i.e., whether confirmation of an extension plan is barred by a discharge in bankruptcy obtained within the previous six years.
Chapter XIII requires the confirmation of a wage-earner extension plan if 'the debtor has not been guilty of any of the acts or failed to perform any of the duties which would be a bar to the discharge of the bankrupt * * *.' § 656 (a) (3) . ”

“ It has been argued that extension plans do not completely avoid the possibility of adjusting the wage earner's debts. It is true that § 660 provides for discharge after compliance with the provisions of a Chapter XIII plan. While this section applies to wage-earner compositions as well as to extensions, a 'discharge' thereunder has a wholly different impact where an extension is involved. ”

“ But an extension plan has no escape hatch for debtors, it is 'a method by which, without resorting to bankruptcy proceedings in the usual sense, a wage earner may meet the claims of creditors.' S.Rep.No.179, 86th Cong., 1st Sess., 2 (1959) . ”

“ Moreover, large sums of money are annually returned to creditors under extension plans, the current rate being well over $26,000,000. As wage earners ordinarily have little or no assets available for distribution in straight bankruptcy, these sums represent settlements which the debtors would otherwise be unable to effect and the creditors unable to obtain. See Note, The Wage Earner Plan A Superior Alternative to Straight Bankruptcy, 9 Utah L.Rev. ”

“ Ordinarily, a wage earner seeking to obtain the benefits of extension proceedings under Chapter XIII need only file a plan that meets the approval of the majority of his creditors, § 652, 11 U.S.C. § 1052, and is confirmed by the court ”

“ We think not. This provision, in setting the effective date of the chapter, provides that confirmations thereunder 'shall not be refused because of a discharge granted or a composition confirmed prior to the effective date of this amendatory Act.' It must be remembered that extension-plan relief of Chapter XIII was novel to the law of bankruptcy. ”

“ But we need not, and do not, go so far as to place this interpretation on the words 'guilty acts.' It suffices that we find in them sufficient ambiguity to impel recourse to the legislative purposes, outlined above, underlying § 14 (c) (5) . ”