Left to right: Andrew Kassner and Joseph Argentina of Drinker Biddle & Reath.
As we work remotely and prepare for the anticipated increase in bankruptcy filings caused by the COVID-19 pandemic impact on the economy, many practitioners are trying to compare this cycle to cycles past, going back all the way to the savings and loan crisis of the late 1980s. One of the co-authors never ceases to be amazed by issues that keep coming up in bankruptcy cases cycle after cycle. One of them is whether a personal guaranty of a commercial lease is discharged in the bankruptcy of the individual guarantor. Court decisions have split on this issue for years.
The issue was recently considered by the bankruptcy appellate panel for the U.S. Court of Appeals for the Sixth Circuit in Orlandi v. Leavitt Family Limited Partnership (In re Orlandi), Case No. 19-8001 (Feb. 28, 2020). The court held that a prepetition guaranty given by the debtor was a contingent claim discharged by the bankruptcy. The court also analyzed and interpreted a recent U.S. Supreme Court ruling on what constitutes a willful violation of the discharge injunction.
