Alan Kim Patrono and Jane H. Patrono

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
IN RE:
ALAN KIM PATRONO, fdba PATRONO &
MURPHY LLC, fdba APPLE LEAF
ABSTRACTING & SETTLEMENT CO. and
JANE H. PATRONO,
Debtors.
MELINDA DAVIS; H&M HOLDINGS
GROUP, LLC; HANNAH HAUSER; and
HAUSER FAMILY FARMS, LLC,
Movants
v.
ALAN KIM PATRONO, fdba PATRONO &
MURPHY LLC, fdba APPLE LEAF
ABSTRACTING & SETTLEMENT CO. and
JANE H. PATRONO
Respondents.
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CHAPTER 11
CASE NO. 1:25-bk-02214-HWV
MOTION FOR ORDER COMPELLING
DEBTORS TO AMEND BANKRUPTCY
PETITION TO REMOVE SUBCHAPTER V
DESIGNATION / CONFIRMATION OF
DEBTORS’ PLAN OF REORGANIZATION
UNDER SUBCHAPTER V OF CHAPTER 11
O PINION
This matter is before the Court on confirmation of the Debtors’ proposed Subchapter V
plan of reorganization, Doc. 72 (the “Plan”), and the objections to confirmation filed by Melinda
Davis, H&M Holdings Group, LLC, Hannah Hauser, and Hauser Family Farms, LLC (the
“Hauser Parties”), Doc. 87, and the United States Trustee, Doc. 88. Also before the Court is the
Hauser Parties’ Motion to compel the Debtors to amend their bankruptcy petition to remove their
Subchapter V designation, or alternatively for the Court to revoke that designation sua sponte,
Doc. 91 (the “Motion”), and the Debtors’ response thereto, Doc. 93.
For the reasons that follow, the Court concludes that Subchapter V eligibility is a
statutory predicate to confirmation of a plan under Subchapter V. The Court further concludes
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that the Debtors do not qualify as small business debtors under 11 U.S.C. § 101(51D).
Confirmation of the Plan will therefore be denied. Because the Court resolves eligibility in
connection with confirmation, separate relief on the Motion is unnecessary. The Motion will be
denied as moot to the extent it seeks separate relief compelling amendment of the petition or
revoking the Subchapter V designation.
I. 	JURISDICTION
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334(b).
These are core proceedings pursuant to 28 U.S.C. § 157(b)(2), including matters concerning the
administration of the estate and confirmation of a plan. 28 U.S.C. § 157(b)(2)(A), (L), and (O).
Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409.
II. 	FACTS AND PROCEDURAL POSTURE
Mr. Patrono is an attorney licensed to practice law in the Commonwealth of
Pennsylvania. The Debtors’ Plan describes him as a seventy-nine-year-old attorney who
practiced primarily in Adams County, Pennsylvania, with a general business practice focused
largely on title insurance and real estate. (Doc. 72.) Mrs. Patrono, his wife, is a retired teacher.
(Id.)
This case arises against the background of a long-running family business dispute. In or
around 2006 or 2007, Mrs. Patrono and her two sisters, Hannah Hauser and Melinda Davis,
became involved in a family business venture conducted through Hauser Estate, Inc. (“the
Corporation”) and Hauser Family Farms, LLC (“the LLC”). The Corporation operated a wine
and hard cider business. The LLC owned or held interests in real property used in connection
with that business.
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To finance the Corporation’s winery and related operations, the Corporation and the LLC
obtained loans from Members 1st Federal Credit Union (“Members 1st”). Mr. Patrono, Mrs.
Patrono, Jonathan Patrono, Melinda Davis, and Hannah Hauser each executed commercial
guarantees in connection with that financing. On July 18, 2018, Members 1st assigned the loans
and related guarantees to H&M Holdings Group, LLC (“H&M”), an entity formed by Hannah
Hauser and Melinda Davis on July 10, 2018. (Doc. 91, pp. 31–44.)1
On July 27, 2018, H&M instituted confessed-judgment proceedings against Mr. Patrono,
Mrs. Patrono, and Jonathan Patrono in the Court of Common Pleas of Adams County,
Pennsylvania. (Doc. 103-3, p. 8.) Four days later, on July 31, 2018, the Corporation filed a
voluntary bankruptcy petition. (See case no. 1:18-bk-03201-HWV.) According to the schedules
filed in that case, Mrs. Patrono held a 1% equity interest in the Corporation when the petition
was filed. The case was later converted to Chapter 7, and the Chapter 7 trustee sold substantially
all of the Corporation’s assets. The case was fully administered and closed on July 12, 2021.
Mrs. Patrono does not list any ownership interest in the Corporation on her schedules in this
case. She does, however, list a 33.33% membership interest in the LLC. (See Doc. 71, p. 14.)
The litigation between the Debtors, the Hauser Parties, and various related entities
continued for years, involving multiple complaints, motions, and appeals across various courts.
The Court refers to that litigation collectively as the “Adams County Litigation.” For present
purposes, the details of the Adams County Litigation matter only insofar as they explain the
source of the asserted Hauser-related liabilities (including the H&M debt), the timing of this
bankruptcy filing, the Debtors’ role in the litigation and related entities, and the parties’
competing arguments about Subchapter V eligibility.
1 For ease of reference, and where appropriate, the Court utilizes the page numbers from the CM/ECF footer.
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During the same general period, Mr. Patrono owned an interest in Patrono & Murphy,
LLC (“Patrono & Murphy”), a separate limited liability company that operated a general
business law practice focused largely on title insurance and real estate. The record suggests that
Patrono & Murphy owned Apple Leaf Abstracting & Settlement Co. (“Apple Leaf”), a title
company. (Doc. 91-2, p. 23.) According to Mr. Patrono, he sold his interest in Patrono & Murphy
to his partner on March 1, 2022 for $400,000. (Id. at 23–24.) Because Apple Leaf was owned by
Patrono & Murphy, Mr. Patrono contends that Apple Leaf transferred with that sale. (Id.)
On July 9, 2025, the Adams County Court of Common Pleas entered a scheduling order
setting trial and related damages proceedings in the Adams County Litigation for October 2025.
(Doc. 32, pp. 15–16.) Before those proceedings occurred, the Debtors filed a joint voluntary
petition under Chapter 11 on August 8, 2025, and elected to proceed under Subchapter V. (See
Doc. 1.) The bankruptcy filing stayed the Adams County Litigation as against the Debtors
pending further order of this Court.
The petition lists “FDBA Patrono & Murphy LLC” and “FDBA Apple Leaf Abstracting
& Settlement Co.” as other names used by Mr. Patrono.2 (Doc. 1.) In the section asking whether
either Debtor was a sole proprietor of any full or part-time business, the Debtors answered “No.”
(Id. at 4.) The petition also states that no bankruptcy case was then pending or being filed by any
business partner or affiliate. (Id. at 3.)
The Debtors filed their schedules on August 22, 2025. (Doc. 22.) As originally filed, the
schedules listed total assets of $4,405,536.18 and total liabilities of $3,599,630.81. The original
Summary of Assets and Liabilities also checked the box stating that the Debtors’ debts were
primarily consumer debts. The Debtors later amended certain schedules. (Doc. 71.) The
2 The record establishes that Patrono & Murphy, LLC and Apple Leaf Abstracting & Settlement Co. are separate legal
entities, not fictitious names or trade names under which Mr. Patrono personally conducted business.
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schedules as amended list real estate consisting of the Debtors’ residence, two rental properties,
and additional real property located in or near Gettysburg, Pennsylvania. The schedules also list
Mr. Patrono’s undefined percentage interests in Patrono & Murphy and Apple Leaf, each valued
at $0.00, and Mrs. Patrono’s one-third membership interest in the LLC, also valued at $0.00.3
(See Doc. 22.)
The Debtors’ schedules do not show active business income. Schedule I identifies Mr.
Patrono as self-employed, but it does not list wages or salary for him. Instead, Schedule I lists
Social Security income and a negative amount on the line for “net income from rental property
and from operating a business, profession, or farm.” The Debtors did not file a separate statement
allocating that amount between rental-property activity and any business or professional activity.
That ambiguity was clarified at the § 341 meeting, which was held and concluded on September
15, 2025. (See Doc. 91-2.) At that meeting, Mr. Patrono confirmed that the Debtors’ income
consisted solely of Social Security and rent, and that the rent was paid to the Debtors personally
because they owned the rental properties individually, not through a business entity. (Id. at
14– 15, 20–22.) Their Chapter 11 current monthly income statement likewise reports Social
Security income and a negative net monthly figure for rental or other real property income. Their
amended Statement of Financial Affairs later reported no income from employment4 or from
3 The amended schedules appear to treat the real property located at 410 Cashtown Road, Gettysburg, Pennsylvania
17325 inconsistently. Schedule A/B lists it in the real-property section and states a value of $2,250,000.00 for both the
entire property and the portion owned by the Debtors. But the same entry describes the Debtors’ interest as a “1/3
Interest in Hauser Family Farms and Winery,” and Schedule A/B separately lists Mrs. Patrono’s one-third interest in
Hauser Family Farms as a business interest. The Court notes this inconsistency only for completeness. For purposes
of this Opinion, the Court does not treat 410 Cashtown Road or other property owned by the LLC as real property
owned directly by the Debtors.
4 In a separate filing, each Debtor also certified that he or she received no payment advices from any source of
employment during the sixty days before the petition date. (Doc. 23.)
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operating a business during the relevant period, while reporting Social Security income and
rental income from the rental properties.
The deadline to object to the Debtors’ Subchapter V designation under Federal Rule of
Bankruptcy Procedure 1020(b) expired on October 15, 2025, thirty days after the § 341 meeting
concluded. No party filed an objection by that deadline. The Debtors, therefore, contend that the
later eligibility challenge advanced by the Motion is untimely. (Doc. 93.)
Shortly after the petition date, the Hauser Parties moved to dismiss or, alternatively, for
relief from the automatic stay to continue the Adams County Litigation. (Doc. 32.) They argued
that the Debtors filed the case in bad faith to delay that litigation, but did not challenge their
eligibility to proceed as Subchapter V debtors. The Debtors opposed dismissal and asserted that
they faced potential liabilities exceeding $2 million, owed substantial legal fees and other debts,
and could not pay creditors outside bankruptcy. (Doc. 42.)
On September 23, 2025, the Court denied the motion to dismiss without prejudice but
modified the automatic stay to allow the Hauser Parties to pursue final, unappealable judgments
in the Adams County Litigation. (Doc. 47.) The Court prohibited enforcement against the
Debtors or property of the estate absent further order. The Adams County court then entered
judgment on October 31, 2025 in favor of the Hauser Parties and against several defendants,
including the Debtors, Jonathan Patrono, Patrono & Murphy, and Apple Leaf (the “Adams
County Judgment”). The Adams County Judgment includes several categories of liability and
relief, including amounts relating to notes and guarantees, breach of fiduciary duty, civil
conspiracy, professional negligence, conversion, fraudulent-transfer claims, fees, costs, and
sanctions. The Adams County Judgment states that the judgments entered against all defendants
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total $6,839,422.28. On November 25, 2025, the Hauser Parties filed proofs of claim based on
the Adams County Judgment.
The Debtors’ monthly operating reports identify their line of business as including Mr.
Patrono’s status as an attorney, Mrs. Patrono’s connection to Hauser Family Farms, LLC, and
rental-property activity. The reports consistently list zero employees and zero receivables. (See
Docs. 41, 66, 81, 85, 90, 97, 113, 135, 146, 165, 176, 189, 207.) They primarily reflect Social
Security deposits, rent-related deposits, ordinary personal expenditures, and issues concerning
the Debtors’ rental properties. Later reports also reflect occasional small deposits identified as
notary fees.
On November 5, 2025, the Debtors filed their Subchapter V Plan. (Doc. 72.) The Plan
describes the failed family orchard, winery, and hard-cider venture associated with the
Corporation and the LLC. It states that Mr. Patrono continues to practice law and identifies three
sources of plan funding: the Debtors’ income, the sale of Mrs. Patrono’s one-third membership
interest in the LLC, and the sale of real estate. The Plan further states that the “majority” of the
Plan will be implemented through liquidation of the Debtors’ assets and that the Debtors’ income
“could never be adequate” to cover plan payments other than the automobile leases.
The Hauser Parties object to confirmation. (Doc. 87.) They argue, among other things,
that the Debtors are not eligible for Subchapter V, that the Plan fails to account properly for the
Adams County Judgment, that the case is not a legitimate small-business reorganization, and that
the Plan cannot be confirmed either under Subchapter V or as a traditional Chapter 11 plan. The
United States Trustee (“UST”) also objects to confirmation. (Doc. 88.) The UST argues that the
Plan contains internal inconsistencies, fails to include cash-flow projections, fails to address the
Adams County Judgment and its effect, fails to identify a plan-payment term or sale timeline,
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fails to identify which properties will be liquidated, and fails to classify and treat all scheduled
secured creditors.
On December 23, 2025, the Hauser Parties filed the Motion now before the Court. (Doc.
91.) The Motion seeks an order compelling the Debtors to amend their petition to remove the
small business debtor designation or, alternatively, revoking the Subchapter V designation. The
Debtors oppose the Motion, arguing that Mr. Patrono is still practicing law, that the Hauser
Parties’ claims are disputed and not final, that the Debtors satisfy Subchapter V, and that the
eligibility challenge may be untimely. (Doc. 93.)
The Court held oral argument and continued hearings on confirmation and the Motion.
Because the confirmation objections and the Motion raised the same eligibility dispute, the Court
directed further briefing on whether the Debtors qualify as small business debtors, including
whether they were “person[s] engaged in commercial or business activities” within the meaning
of 11 U.S.C. § 101(51D)(A). The parties submitted briefs, Docs. 103, 114, 153, 155, 161, and the
Court heard additional argument on May 19, 2026. The matter is therefore ripe for decision.
III. ANALYSIS
The Debtors’ eligibility for Subchapter V is before the Court in two related procedural
postures: as the basis for the Motion and as a disputed confirmation requirement. Those postures,
however, are not on equal footing. The Motion seeks procedural relief directed to the Debtors’
Subchapter V designation after the deadline imposed by Federal Rule of Bankruptcy Procedure
1020(b) expired. Resolving eligibility through that Motion would therefore require the Court to
decide whether Rule 1009(a)(2) may be used as a substitute for a timely Rule 1020(b) objection,
or as a means to avoid the consequence of missing that deadline. The relief sought by the Motion
also appears to rest substantially within the Court’s discretion.
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Confirmation presents a different posture. The Debtors seek confirmation of a plan under
Subchapter V. Unlike the Motion, confirmation is governed by mandatory statutory conditions. If
the applicable requirements of § 1191(a) or § 1191(b) are satisfied, the Court “shall” confirm the
plan. The Court therefore must determine whether those requirements are met. If eligibility to
proceed under Subchapter V is a statutory predicate to confirmation, deciding eligibility in the
confirmation context may resolve the substantive issue underlying the Motion and render
separate relief on the Motion unnecessary. The Court therefore begins with that issue.
A. Is Subchapter V Eligibility a Statutory Predicate to Confirmation of a Subchapter V
Plan?
The Code’s confirmation provisions supply the governing rule. Confirmation under
Subchapter V may proceed, if at all, under either § 1191(a) or § 1191(b). Section 1191(a) governs
consensual confirmation and requires satisfaction of all requirements of § 1129(a), except
§ 1129(a)(15). Section 1191(b) governs nonconsensual confirmation and requires satisfaction of
all requirements of § 1129(a), except §§ 1129(a)(8), (10), and (15), as well as the additional
requirements imposed by § 1191(b). In either case, §§ 1129(a)(1) and (a)(2) apply. Those
provisions require that the “plan” and the “plan proponent” comply with the “applicable
provisions of this title.” 11 U.S.C. §§ 1129(a)(1), (a)(2), 1191(a), (b).
The “applicable provisions of this title” include §§ 1189(a), 1182(1), and 101(51D),
which define who may file a plan and thus act as the plan proponent under Subchapter V. First,
§ 1189(a) provides that “[o]nly the debtor may file a plan under this subchapter.” 11 U.S.C.
§ 1189(a). Second, § 1182(1) identifies who the “debtor” is for purposes of that limitation by
providing that the term debtor means a “small business debtor.” 11 U.S.C. § 1182(1). Third,
§ 101(51D) defines and limits who may qualify as a “small business debtor” for purposes of
Subchapter V. 11 U.S.C. § 101(51D). Considered together with §§ 1191(a) and 1191(b), which
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incorporate §§ 1129(a)(1) and 1129(a)(2), those provisions establish a direct rule: only a debtor
that qualifies as a small business debtor under § 101(51D) may file a plan and act as a plan
proponent under Subchapter V in compliance with the applicable provisions of title 11.5
Two consequences follow. The first concerns the plan proponent. Section 1129(a)(2)
requires the plan proponent to comply with the applicable provisions of title 11. A plan
proponent that does not qualify as a small business debtor under § 101(51D) is not a Subchapter
V “debtor” under § 1182(1) and therefore is not authorized by § 1189(a) to file a plan under
Subchapter V. Such a plan proponent has not complied with the applicable provisions of title 11
and cannot satisfy § 1129(a)(2).
The second consequence concerns the plan. Section 1129(a)(1) requires the plan to
comply with the applicable provisions of title 11. A plan filed under Subchapter V by a plan
proponent that does not qualify as a small business debtor is not a plan filed in compliance with
§ 1189(a), because § 1189(a) permits only the Subchapter V “debtor” to file such a plan. Such a
plan does not comply with the applicable provisions of title 11 and cannot satisfy § 1129(a)(1). It
cannot be confirmed under Subchapter V.
The Court therefore concludes that Subchapter V eligibility is a statutory predicate to
confirmation of a Subchapter V plan. That conclusion matters here. The Debtors seek
confirmation of a Subchapter V plan, and their eligibility is disputed. Because eligibility is a
statutory predicate to confirmation, the Debtors must establish that they are eligible to proceed
under Subchapter V as part of their burden to establish that the Plan satisfies the applicable
5 Section 103(i) independently reinforces this conclusion. It provides that Subchapter V “applies only in a case under
chapter 11 in which a debtor (as defined in section 1182) elects that subchapter V of such chapter shall apply.” 11
U.S.C. § 103(i). Section 1182(1), in turn, defines “debtor” for purposes of Subchapter V to mean a “small business
debtor.” 11 U.S.C. § 1182(1). Thus, Subchapter V applies only if the person electing its application qualifies as a small
business debtor under § 101(51D).
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confirmation requirements. See, e.g., In re Tribune Co., 464 B.R. 126, 151 (Bankr. D. Del. 2011)
(“The plan proponent bears the burden of establishing the plan’s compliance with each of the
requirements set forth in § 1129(a)[.]”).6
The Court now turns to the statutory definition that controls Subchapter V eligibility. For
these Debtors, the relevant definition is § 101(51D)(A), which defines the term “small business
debtor.”
B. Are the Debtors “Small Business Debtors”?
Section 101(51D)(A) defines the term “small business debtor” as follows:
(51D) The term “small business debtor”—
(A) subject to subparagraph (B), means a person engaged in commercial or business
activities (including any affiliate of such person that is also a debtor under this title
and excluding a person whose primary activity is the business of owning single
asset real estate) that has aggregate noncontingent liquidated secured and unsecured
debts as of the date of the filing of the petition or the date of the order for relief in
an amount not more than $3,424,000 (excluding debts owed to 1 or more affiliates
or insiders), not less than 50 percent of which arose from the commercial or
business activities of the debtor[.]
11 U.S.C. § 101(51D)(A).
Courts construing §§ 101(51D) and 1182 generally identify four requirements for
Subchapter V eligibility: (1) the debtor must be a “person” within the meaning of § 101(41); (2)
the debtor must be engaged in commercial or business activities;7 (3) the debtor’s aggregate
6 Courts addressing eligibility objections under Federal Rule of Bankruptcy Procedure 1020 have likewise generally
placed the burden of proving Subchapter V eligibility on the debtor. See In re Stevens, 667 B.R. 428, 434 (Bankr.
S.D.W. Va. 2025) (collecting cases); NetJets Aviation, Inc. v. RS Air, LLC (In re RS Air, LLC), 638 B.R. 403, 414
(B.A.P. 9th Cir. 2022); In re Offer Space, LLC, 629 B.R. 299, 304 (Bankr. D. Utah 2021); In re Ikalowych, 629 B.R.
261, 275 (Bankr. D. Colo. 2021). But see In re Body Transit, Inc., 613 B.R. 400, 409 n.15 (Bankr. E.D. Pa. 2020).
7 As discussed further in Section III.B.1.b. below, this shorthand reference is useful, but incomplete. It omits the
parenthetical Congress placed immediately after the phrase “engaged in commercial or business activities.” That
parenthetical bears directly on the second requirement because it identifies when the activities of an affiliate may be
considered for purposes of determining an individual debtor’s eligibility. Failing to give the parenthetical operative
effect risks obscuring the statutory limit Congress included.
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noncontingent liquidated secured and unsecured debts must not exceed the applicable statutory
limit as of the petition date; and (4) not less than 50 percent of those debts must have arisen from
the commercial or business activities of the debtor. See, e.g., In re Stevens, 667 B.R. 428, 434
(Bankr. S.D.W. Va. 2025).
There is no dispute that the Debtors, as individuals, are “persons” within the meaning of
§ 101(41). Thus, the Court need not decide that issue. Nor must the Court decide whether the
Debtors satisfy the statutory debt-limit requirement, because two other requirements of
§ 101(51D)(A) are dispositive. The first is whether the Debtors were “engaged in commercial or
business activities” within the meaning of § 101(51D)(A). The Court will refer to this as the
“engaged in” requirement. That inquiry includes whether the Debtors may rely on activities
conducted through, for, or on behalf of separate entities. The second requirement is whether “not
less than 50 percent” of their qualifying debts arose from commercial or business activities
properly treated as their own under § 101(51D)(A). The Court will refer to this as the “debt-
composition” requirement. The Court limits its analysis to those two requirements.
1. 	Were the Debtors “Engaged in Commercial or Business Activities”?
Statutory interpretation begins with the text. “When the words of a statute are
unambiguous, . . . judicial inquiry is complete.” In re Phila. Newspapers, LLC, 599 F.3d 298, 304
(3d Cir. 2010) (internal quotation marks omitted). Where a “statute’s language is plain, the sole
function of the courts—at least where the disposition required by the text is not absurd—is to
enforce it according to its terms.” Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A.,
530 U.S. 1, 6 (2000) (internal quotation marks omitted). The Court must also “give effect, if
possible, to every clause and word of a statute.” Duncan v. Walker, 533 U.S. 167, 174 (2001)
(quoting United States v. Menasche, 348 U.S. 528, 538–39 (1955)) (internal quotation marks
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omitted). When Congress leaves a term undefined, courts give that term its ordinary meaning,
read in context. BP Am. Prod. Co. v. Burton, 549 U.S. 84, 91 (2006).
With those principles in mind, the Court turns to the “engaged in” requirement. That
requirement has two components. The first asks whether the Debtors were presently “engaged
in” the asserted activity as of the petition date. The second asks whether the activity that survives
that inquiry is a “commercial or business” activity that may properly be treated as the Debtors’
own under § 101(51D)(A). The Court begins with the first component.
a. 	“Engaged In” Requires “Present” Engagement as of the Petition Date
Section 101(51D)(A) uses the present tense. It requires that the person be “engaged in”
commercial or business activities. It does not ask whether the person was formerly engaged in
those activities. Although some early decisions read the definition more broadly, the better-
reasoned view is that the term “engaged in” is “inherently contemporary in focus and not
retrospective. Thus, a debtor need not be maintaining its core or historical operations on the
petition date, but it must be ‘presently’ engaged in some type of commercial or business
activities to satisfy § 1182(1)(A).” NetJets Aviation, Inc. v. RS Air, LLC (In re RS Air, LLC), 638
B.R. 403, 410 (B.A.P. 9th Cir. 2022); see also In re Ikalowych, 629 B.R. 261, 281–83 (Bankr. D.
Colo. 2021); In re Stevens, 667 B.R. at 438. That does not require a “down-to-the-second
review” of the person’s activities at the precise moment of filing. In re Stevens, 667 B.R. at 439;
see also In re Ikalowych, 629 B.R. at 283. Activity immediately before or after the petition date
may inform the inquiry, but it cannot replace it. The statute requires present engagement in the
asserted activity as of the petition date, not merely a past or historical connection to activity. In re
RS Air, LLC, 638 B.R. at 409–10; In re Stevens, 667 B.R. at 438.
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Applying that standard here, the Debtors assert several bases for eligibility. First, they
rely on the Adams County Litigation, which was pending as of the petition date. As indicated
above, that litigation includes claims asserted against the Debtors personally, as well as claims
arising from business ventures conducted through separate entities associated with them,
including the Corporation, the LLC, Patrono & Murphy, and Apple Leaf. Second, the Debtors
rely on Mr. Patrono’s alleged continuing law practice and notary business; his asserted ownership
interests in Patrono & Murphy and Apple Leaf; Mrs. Patrono’s membership interest in the LLC;
and personal guarantees, judgment-related debt, and other residual liabilities arising from the
failed business ventures.
The record establishes that as of the petition date the Debtors were “presently” engaged
in only two of the asserted bases: the Adams County Litigation and the personally owned rental-
property activity. It is uncontested that the Adams County Litigation remained pending as of the
petition date and included claims against the Debtors in their personal capacities, as well as
related proceedings involving separate entities associated with the Debtors. The record also
establishes that H&M instituted confessed-judgment proceedings against the Debtors in July
2018; the litigation continued for years through multiple proceedings and appeals; and, before
the petition date, the Adams County Court of Common Pleas had entered a scheduling order
setting trial and related damages proceedings for October 2025. The Debtors filed this case
before those proceedings occurred, and the bankruptcy filing stayed the Adams County
Litigation against the Debtors. These facts establish that the Debtors were presently engaged in
active litigation when the petition was filed.
Second, the Debtors were presently engaged in personally owned rental-property activity
when the petition was filed. The Debtors’ schedules identify rental properties owned in their own
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names. Mr. Patrono confirmed at the § 341 meeting that the Debtors received rent personally
from those properties, and the amended Statement of Financial Affairs and monthly operating
reports reflect rental income and rental-property-related activity. These undisputed facts of
record establish the Debtors’ present engagement in personally owned rental-property activity as
of the petition date.
Apart from these two activities, the record does not establish present engagement in any
continuing law practice, notary business, or other operating business activity conducted by either
Debtor, individually, as a sole proprietor, or otherwise in a personal capacity, as of the petition
date. The schedules, current monthly income statement, amended Statement of Financial Affairs,
§ 341 testimony, and monthly operating reports do not reflect active law-practice income,
employees, receivables, or ongoing business operations as of the petition date. Although later
monthly operating reports reflect occasional small deposits identified as notary fees, those
isolated entries do not establish that either Debtor was operating a continuing notary business or
was presently engaged in notary business activity as of the petition date.
Nor does the record establish that the Corporation, the LLC, Patrono & Murphy, or Apple
Leaf were actively operating businesses as of the petition date. The petition identifies “FDBA
Patrono & Murphy LLC” and “FDBA Apple Leaf Abstracting & Settlement Co.” as other names
used by Mr. Patrono, but both are separate legal entities, and the Debtors report that neither
Debtor operated a sole proprietorship. The schedules value Mr. Patrono’s interests in Patrono &
Murphy and Apple Leaf at $0.00, and the amended schedules value Mrs. Patrono’s one-third
membership interest in the LLC at $0.00. The record shows, at most, Mrs. Patrono’s passive
ownership of a membership interest in the LLC and asserted receipt of a Schedule K-1. It does
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not show that she was actively participating in, managing, or conducting activity for the LLC as
of the petition date.
Finally, the personal guarantees, judgment-related debt, and other residual liabilities
identified by the Debtors do not establish a separate basis for present engagement in activity as
of the petition date. As explained more fully below, “activity” refers to behavior or actions of a
particular kind. See infra Section III.B.1.b.ii. That definition matters here because being
obligated under a guarantee or owing a debt describes a legal status or liability, not behavior or
action in which the Debtors were engaged.8 As such, the only possible activity associated with
these asserted bases is the execution of a guarantee or the conduct that gave rise to the judgment-
related debt and residual liabilities. But even assuming those things qualify as activity, they
occurred well before the petition date. Thus, the Debtors were not presently engaged in that
activity when the petition was filed. For these reasons, and because the phrase “engaged in” is
present tense and requires the Debtors to be presently engaged in the asserted activity as of the
petition date, the guarantees, judgment-related debt, and residual liabilities do not establish
present engagement in activity for purposes of § 101(51D)(A).9
The Court therefore concludes that the Debtors satisfy the present-engagement
component of the “engaged in” requirement with respect to the Adams County Litigation and
their personally owned rental-property activity. The record does not establish present
8 This ordinary meaning is consistent with dictionary definitions. Merriam-Webster defines “debt” as “a state of being
under obligation to pay or repay someone or something in return for something received” and “a state of owing.” Debt,
Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/debt (last visited Aug. 31, 2026). It
defines “guarantee” as “to promise to answer for the debt, default, or miscarriage of” another. Guarantee, Merriam-
Webster.com Dictionary, https://www.merriam-webster.com/dictionary/guarantee (last visited Aug. 31, 2026). Thus,
just as passive ownership of a membership interest and asserted receipt of K-1s do not themselves constitute activity,
the continued existence of a debt or liability does not itself constitute activity. See infra Section III.B.1.b.ii.
9 To the extent the guarantees, judgment-related debt, and residual liabilities are connected to any present activity as
of the petition date, that activity is the Adams County Litigation, which the Court has already treated as presently
pending. They therefore do not establish present engagement in any additional activity separate from that litigation.
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engagement, as of the petition date, in a continuing law practice, notary business, active
operations of the Corporation, the LLC, Patrono & Murphy, Apple Leaf, or any other ongoing
operating business activity conducted by either Debtor. Nor do the Debtors’ passive ownership
interests, asserted receipt of K-1s, personal guarantees, judgment-related debt, or residual
business liabilities establish present engagement in any activity separate from the Adams County
Litigation or the personally owned rental-property activity.
Having determined which activities satisfy the present-engagement component of the
“engaged in” requirement, the Court next turns to the question of whether those activities satisfy
the “commercial or business activities” component.
b. 	Scope of the “Commercial or Business Activities” Component
Resolving this component begins with a threshold interpretive issue: whether the phrase
“a person engaged in commercial or business activities” may be applied in isolation, or whether
it must be read together with the immediately following parenthetical and the related debt-
composition language in § 101(51D)(A). That threshold issue matters because the Debtors rely in
part on activity conducted for, through, or on behalf of separate entities. Once the threshold
interpretive issue is resolved, two questions follow. First, whose activities may be considered?
Second, among the activities that may be considered, which are commercial or business in
nature?
The relevant statutory language is “a person engaged in commercial or business activities
(including any affiliate of such person that is also a debtor under this title . . .).” 11 U.S.C.
§ 101(51D)(A).10 Courts often describe this inquiry merely as whether the debtor was “engaged
10 The omitted portion of the parenthetical excludes “a person whose primary activity is the business of owning single
asset real estate.” 11 U.S.C. § 101(51D)(A). No party developed an argument that this exclusion applies to the Debtors,
and the record does not establish that the Debtors’ primary activity was the business of owning single asset real estate.
The Court need not decide whether the exclusion applies. Even assuming, without deciding, that it does not prevent
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in commercial or business activities,” without further discussion of the parenthetical. That
shorthand may be convenient, but it risks obscuring the role the parenthetical plays in the
statutory definition. The parenthetical is part of the statutory text. It is not surplusage, and the
Court may not treat it as optional.
The Court recognizes that a substantial body of case law has analyzed Subchapter V
eligibility without giving operative effect to the parenthetical. See, e.g., In re Ellingsworth
Residential Cmty. Ass’n, Inc., 125 F.4th 1365, 1378–80 (11th Cir. 2025); In re RS Air, LLC, 638
B.R. at 409–13; In re Tombul, No. 1:26-bk-10223, 2026 WL 1096475, at *1–3 (Bankr. E.D.
Tenn. Apr. 22, 2026); In re Stevens, 667 B.R. at 434–41; McGriff Ins. Servs., LLC v. Wilson (In re
Wilson), 666 B.R. 828, 836–38 (Bankr. M.D. Ga. 2024); In re Fama-Chiarizia, 655 B.R. 48,
58– 72 (Bankr. E.D.N.Y. 2023); In re Reis, No. 22-00517, 2023 WL 3215833, at *3–6 (Bankr. D.
Idaho May 2, 2023); Nat’l Loan Invs., L.P. v. Rickerson (In re Rickerson), 636 B.R. 416, 421–27
(Bankr. W.D. Pa. 2021); In re McCune, 635 B.R. 409, 418–22 (Bankr. D.N.M. 2021); In re
Vertical Mac Constr., LLC, No. 6:21-bk-01520, 2021 WL 3668037, at *1–4 (Bankr. M.D. Fla.
July 23, 2021); In re Port Arthur Steam Energy, L.P., 629 B.R. 233, 235–39 (Bankr. S.D. Tex.
2021); In re Blue, 630 B.R. 179, 186–91 (Bankr. M.D.N.C. 2021); In re Offer Space, LLC, 629
B.R. 299, 303–11 (Bankr. D. Utah 2021); In re Ikalowych, 629 B.R. at 274 n.66, 283–87 (noting
but declining to apply an argument based on the language of the parenthetical); In re Johnson,
No. 19-42063, 2021 WL 825156, at *4–9 (Bankr. N.D. Tex. Mar. 1, 2021); In re Blanchard, No.
19-12440, 2020 WL 4032411, at *1–2 (Bankr. E.D. La. July 16, 2020); In re Thurmon, 625 B.R.
417, 421–24 (Bankr. W.D. Mo. 2020). In those decisions, the parenthetical is either omitted from
the formulation of the issue, appears only in an initial quotation of the statute, or is
consideration of the Debtors’ personally owned rental-property activity, for the reasons set forth in Section III.B.2.,
the Debtors have not established the separate debt-composition requirement of § 101(51D)(A).
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acknowledged without being given operative effect. It then plays no meaningful role in the
analysis. The courts generally proceed directly to whether the debtor was engaged in commercial
or business activities, often under a broad totality-of-the-circumstances inquiry, without first
asking what work the parenthetical performs.
That approach is not persuasive on the specific issue presented here. As explained above,
the parenthetical is part of the statutory text and may not be ignored. Because the Court must
“give effect, if possible, to every clause and word of a statute,” Duncan, 533 U.S. at 174, the
parenthetical must be given independent effect. To the extent the cited decisions do not do so,
this Court declines to follow them on that issue.
Returning to the text, the Court must read the statutory language as a whole because
statutory construction is a holistic endeavor. United Sav. Ass’n of Tex. v. Timbers of Inwood
Forest Assocs., Ltd., 484 U.S. 365, 371 (1988). A provision that may appear uncertain in
isolation is often clarified by the rest of the statutory scheme, including where “the same
terminology is used elsewhere in a context that makes its meaning clear.” Id. Thus, the phrase “a
person engaged in commercial or business activities” must be read together with the immediately
following parenthetical and the later requirement that not less than 50 percent of the debtor’s
qualifying debts arise from “the commercial or business activities of the debtor.” 11 U.S.C.
§ 101(51D)(A). The Court must give effect, if possible, to each part of that definition and may
not read any portion of the text in isolation or as though another portion were absent. The Court
will therefore read those provisions together to determine whose commercial or business
activities may be considered.
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i. 	The Activities Must Be the Debtors’ Own Unless the Parenthetical Applies
The structure of the statute shows that the language preceding the parenthetical refers to
the debtor’s own commercial or business activities, not the activities of another person or
separate legal entity. In relevant part, § 101(51D)(A) defines a “small business debtor” as “a
person engaged in commercial or business activities.” The “person” referred to is the debtor
whose eligibility is being tested. The statute then adds, in the parenthetical, “including any
affiliate of such person that is also a debtor under this title.”11 That added language would be
mere surplusage if the language preceding it already included the activities of separate entities.
Put differently, if the language preceding the parenthetical already permitted a debtor to qualify
based on another business entity’s activities, there would be no reason to specify the condition
under which an affiliate’s activities may also be considered. Such a reading would create
unnecessary tension between the opening phrase and the parenthetical. The Court must avoid that
result because statutory text must be read as a whole, and related clauses should be construed to
operate harmoniously rather than in tension when the text permits. See Jones v. Hendrix, 599
U.S. 465 (2023); United States v. Bass, 404 U.S. 336, 344 (1971). Here, the harmonious reading
is that the opening phrase refers to the debtor’s own commercial or business activities, while the
parenthetical identifies the condition under which an affiliate’s activities may also be considered.
That reading also accords with the cardinal rule that Congress is presumed to say what it means
and that courts must give effect, if possible, to every word and clause of a statute.
11 Congress placed the affiliate clause in the parenthetical immediately after the phrase “engaged in commercial or
business activities.” This placement shows that the affiliate clause bears on the “commercial or business activities”
component of the “engaged in” requirement, rather than changing the eligible “person” whose debts are measured
under the debt-limit and debt-composition requirements. The wording confirms the point. The phrase “any affiliate of
such person” assumes that the eligible person has already been identified and then refers to that person’s affiliate. The
affiliate clause therefore does not replace the eligible “person” with the affiliate. It identifies when an affiliate’s
commercial or business activities may be considered in determining whether the eligible person is “engaged in
commercial or business activities.”
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The Court adopts that harmonious reading. The language preceding the parenthetical
refers only to the debtor’s own commercial or business activities. The parenthetical identifies the
limited circumstance in which the activities of an affiliate may be considered, provided the
affiliate is also a debtor under title 11. See 11 U.S.C. § 101(51D). In other words, the
parenthetical provides the condition under which an affiliate’s commercial or business activities
may be “attributed” to a debtor for purposes of satisfying this requirement. Absent attribution
under the parenthetical, the activities must be the debtor’s own commercial or business activities.
Context confirms this reading.
First, the debt-composition requirement reinforces this reading. Section 101(51D)(A)
uses the phrase “commercial or business activities” again when it later requires that not less than
50 percent of the debtor’s qualifying debts arise from “the commercial or business activities of
the debtor.” The added words “of the debtor” confirm that the statute is concerned not merely
with whether the activities are commercial or business in nature, but also with whose activities
they are. That language recognizes a distinction between the debtor’s commercial or business
activities and those of another person or entity. Read together with the language preceding the
parenthetical, the debt-composition requirement shows that the phrase “commercial or business
activities” refers, in the first instance, to the debtor’s own commercial or business activities, not
to the activities of another person or a separate legal entity.
That conclusion accords with the presumption of consistent usage. When Congress uses
the same term or phrase in the same statute, courts generally presume that the words carry the
same meaning unless context indicates otherwise. See Ratzlaf v. United States, 510 U.S. 135, 143
(1994). Here, Congress used the same operative phrase, “commercial or business activities,”
twice within the same definition. The Court therefore gives that phrase the same substantive
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meaning in both clauses, while also giving effect to the words “of the debtor” in the debt-
composition clause.12
The parenthetical’s use of the word “including” does not change the Court’s reading. The
Bankruptcy Code provides that “includes” and “including” are not limiting. 11 U.S.C. § 102(3).
Because of that rule, one might argue that the parenthetical merely identifies an example
Congress wanted to make clear was included, without foreclosing consideration of other
separate-entity activities. But that reading rests on an unsupported premise: that the opening
phrase already permits a debtor to rely on activities performed for, through, or on behalf of any
separate legal entity, while nevertheless leaving doubt about whether the activities of “any
affiliate of such person that is also a debtor under this title” are included. Nothing in the statutory
text suggests such a distinction. If the opening phrase already reached separate-entity activities
generally, it would necessarily include affiliates of the debtor that are also debtors under title 11.
Under that reading, the parenthetical’s specific reference to those entities would serve little or no
purpose.
The better reading gives meaning to both the opening phrase and the parenthetical. The
opening language covers only the debtor’s own commercial or business activities. Thus, a debtor
may rely on activity conducted personally, as a sole proprietor, under a trade name that is not
itself a separate legal entity, or in some other personal capacity without resort to the
parenthetical. The parenthetical applies when the activity being considered is that of a separate
12 The Court recognizes the general principle that when Congress includes language in one part of a statute but omits
it in another, courts ordinarily presume the difference was intentional. See Russello v. United States, 464 U.S. 16, 23
(1983). But that principle does not support a contrary reading here. The difference in wording reflects the different
grammar and function of the two clauses. The opening phrase identifies whose activities matter by referring to “a
person engaged in commercial or business activities.” The “person” is the debtor whose eligibility is being tested. The
debt-composition clause, by contrast, asks which debts arose from which activities, and the words “of the debtor”
identify whose commercial or business activities are relevant to that inquiry. Omitting “of the debtor” from the opening
phrase therefore does not imply that a debtor may rely on the activities of any separate entity.
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legal entity, and then only if the entity is an affiliate that is also a debtor under this title. On that
question, Congress did not speak broadly. It did not say that the activities of any related business,
commonly controlled entity, or entity for which the debtor acted may be considered. It referred
specifically to “any affiliate of such person that is also a debtor under this title.” 11 U.S.C.
§ 101(51D)(A). Reading “including” to permit consideration of separate-entity activity without
regard to whether that entity is “also a debtor under this title” would not merely give “including”
its non-limiting effect; it would strip the parenthetical’s condition of meaningful effect.
The Court’s interpretation of the parenthetical is also consistent with the available
secondary authority. The United States Trustee Program’s Policy and Practices Manual explains
that “[a] debtor who is an ‘affiliate’ as defined in section 101(2), of a small business debtor will
itself be considered a small business debtor as long as aggregate non-insider debts of the
affiliated debtors do not exceed the [applicable statutory] debt limit.” U.S. Trustee Program
Policy and Practices Manual, Vol. 3, § 3-14.2. Applying that rule, the Manual explains that “[i]f,
therefore, both an individual and that person’s closely held corporation or limited liability
company (LLC) file chapter 11 petitions and if the aggregate debts of the two entities do not
exceed the [applicable statutory] limit, both entities will be treated as small business debtors.” Id.
The Manual then draws the converse. When only the individual files, the individual “would most
likely not be a small business debtor because the business entity, and not the individual, is the
person ‘engaged in commercial or business activities.’” Id.13 Norton Bankruptcy Law and
Practice reads the parenthetical in the same way. It explains that the parenthetical may allow an
individual business owner to qualify when both the individual and the business file bankruptcy,
13 Although that discussion appears in the Manual’s small-business Chapter 11 discussion rather than in a Subchapter
V-specific discussion, the same statutory definition supplies the eligibility requirement at issue here. See 11 U.S.C.
§§ 101(51D), 1182(1).
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even if the individual is not separately engaged in commercial or business activities. 4 Norton
Bankr. L. & Prac. 3d § 107:1. Neither source is binding. Both, however, read the statutory text
the same way this Court does: the activities of a separate business entity are not automatically the
activities of the individual owner, and the parenthetical supplies the statutory path for attributing
qualifying affiliate activity to the debtor.
The decisions cited by the parties and referenced above do not persuade the Court
otherwise. Many are useful in identifying when a debtor is presently engaged in activity and
when particular activity may be commercial or business in nature. But they do not give operative
effect to the parenthetical when addressing the distinct statutory question presented here: whose
activities may be considered. To the extent those decisions omit the parenthetical from the
analysis, quote the parenthetical without giving it operative effect, or proceed directly to a broad
totality-of-the-circumstances inquiry, the Court does not find them persuasive on whether
activity conducted for, through, or on behalf of a separate entity may be treated as the debtor’s
own activity. That question must be answered by the statutory text, and the text permits separate-
entity activity to be attributed to the debtor only through the condition Congress included in the
parenthetical.
Nor does the Court’s reading frustrate Subchapter V’s remedial purpose. Some courts
have expressed concern that a narrow reading of Subchapter V eligibility could exclude
meritorious small business debtors merely because their debts arose from former operations or
activities conducted in another capacity. See In re Blue, 630 B.R. at 191. That concern is not
implicated by the Court’s interpretation of § 101(51D)(A). A debtor engaged in its own
commercial or business activities may qualify based on those activities. If the debtor is an
individual, the debtor may rely on activity conducted in a personal capacity or as a sole
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proprietor. If the debtor is a limited liability company, corporation, or another eligible person, the
debtor may rely on its own commercial or business activities. Thus, the Court’s reading does not
restrict the primary class of Subchapter V debtors. Nor does it categorically exclude individuals
who hold ownership interests in separate legal entities, such as limited liability companies or
corporations. An individual owner may qualify based on the owner’s own commercial or
business activities, or may rely on the activities of a separate legal entity through the
parenthetical when that entity is both an affiliate of the debtor and a debtor under title 11. That
structure makes sense. Business owners often guarantee business debt, and coordinated relief for
the business and its owner may be necessary to achieve a meaningful small-business
reorganization. The parenthetical allows that coordinated treatment while ensuring transparency
to creditors and subjecting the business whose activities are being relied upon to bankruptcy-
court supervision.
The only category of individual owner restricted by the Court’s reading is one whose
eligibility depends on treating the activities of a separate business entity as the individual’s own,
even though that entity is not an affiliate of the debtor that is also a debtor under title 11. That
restriction makes sense and is consistent with Subchapter V’s purpose, which is to facilitate
small-business debtor reorganizations under Chapter 11. If the business whose activities are
being relied upon is not itself a debtor, then there is no small-business debtor reorganization for
Subchapter V to facilitate. There is only an individual debtor seeking relief based on ownership,
former ownership, or involvement in a small business that is not itself a debtor under title 11.
Extending Subchapter V to that individual under those circumstances would not advance the
reorganization or administration of a small business debtor. It would instead allow the individual
to obtain Subchapter V relief by relying on the activities of a business that is not seeking
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bankruptcy relief and is not subject to bankruptcy-court or creditor supervision. Section
101(51D)(A) does not permit that result.14
Accordingly, the Court concludes that the phrase “commercial or business activities” in
§ 101(51D)(A) refers, in the first instance, to the debtor’s own commercial or business activities.
Separate-entity activity may be attributed to the debtor only through the parenthetical, and only
when the separate entity is both an affiliate of the debtor and a debtor under title 11.
The Court now applies that conclusion to the facts of this case. The analysis of the phrase
“engaged in” above narrowed the Debtors’ asserted bases for eligibility. Thus, only three
categories remain for this part of the analysis. First, the Debtors rely on their involvement in the
portions of the Adams County Litigation arising from business ventures conducted through
separate entities associated with them. Second, they rely on their own defense of claims asserted
against them personally in that litigation. Third, they rely on their personally owned rental-
property activity. The first category implicates the parenthetical because it concerns activity
conducted for, through, or on behalf of separate entities. The second and third categories do not
raise the same issue because they concern acts taken by the Debtors on their own behalf.
The Court first addresses the entity-related litigation activity. An individual may act for a
corporation, limited liability company, partnership, or other separate legal entity in many ways.
The individual may manage operations, sign documents, negotiate with creditors, direct litigation
strategy, participate in litigation, pursue appeals, or otherwise act on the entity’s behalf. Those
acts are often commercial or business in nature. But when they are performed for, through, or on
behalf of the separate entity, they remain the separate entity’s commercial or business activities.
14 Under the contrary reading, an individual owner could seek Subchapter V relief based on the activities of a separate
business entity even if that entity is solvent, not in bankruptcy, and has no need to reorganize. That result is difficult
to reconcile with a statute designed to facilitate the reorganization of small business debtors in bankruptcy.
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In that setting, the individual acts not in an individual capacity, but in a representative capacity as
an officer, manager, member, agent, or other representative of the entity. The acts do not become
the individual debtor’s own commercial or business activities merely because the individual
supplied the labor, exercised control, or faces personal liability arising from the same underlying
events.
On this record, much of the Adams County Litigation arose from or involved business
activity conducted for, through, or on behalf of separate entities, including the Corporation, the
LLC, Patrono & Murphy, Apple Leaf, and other entities involved in the failed Hauser business
venture. With respect to that portion of the litigation, the Debtors acted not in their individual
capacities, but in representative capacities on behalf of the separate entities. To rely on that
litigation activity for eligibility purposes, they had to show that it was their own activity, rather
than activity conducted for, through, or on behalf of a separate entity. They have not made that
showing.
Nor have the Debtors shown that the condition stated in the parenthetical applies to that
portion of the litigation activity. They have not established that the Corporation, the LLC,
Patrono & Murphy, Apple Leaf, or any other relevant entity was both an affiliate of the Debtors
and also a debtor under title 11 as of the petition date. Because the parenthetical’s condition has
not been established, the Court may not treat any of the litigation activity performed for, through,
or on behalf of those separate entities as the Debtors’ own activity for purposes of
§ 101(51D)(A).
The Court next considers the Debtors’ remaining two bases for asserted eligibility. First,
to the extent the Debtors defended claims asserted against them individually, pursued appeals in
their own names, or otherwise acted on their own behalf in response to personal liability, those
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acts were the Debtors’ own activities. Second, the Debtors owned the rental properties
individually, received rent personally, and reported rental-property-related income and activity.
That rental-property activity was also the Debtors’ own activity. Both categories may therefore
be considered under the opening phrase “a person engaged in commercial or business activities,”
without resorting to the parenthetical.
But that conclusion decides only whose activities may be considered. It does not decide
whether those activities were commercial or business in nature. The Debtors’ own litigation
activity does not automatically qualify as commercial or business activity merely because it
arose from the same factual setting as commercial or business activities conducted by separate
entities. Likewise, personally owned rental-property activity must qualify as commercial or
business activity on its own terms. Whether the Debtors’ own litigation activity and personally
owned rental-property activity satisfy the “commercial or business activities” component of the
“engaged in” requirement is addressed in the next section.
ii. 	The Activity Must Be Commercial or Business in Nature
Section 101(51D)(A) does not define “commercial,” “business,” or “activities.” Courts
therefore have looked to the ordinary meaning of those terms, using Merriam-Webster
definitions. See, e.g., Stevens, 667 B.R. at 436–37; In re Offer Space, LLC, 629 B.R. at 305–06;
In re Blue, 630 B.R. at 188–89; In re Port Arthur Steam Energy, L.P., 629 B.R. at 236–37; In re
Vertical Mac Constr., LLC, 2021 WL 3668037, at *3. That approach is sound.
Under those ordinary meanings, “commercial” refers to matters “of or relating to
commerce,” and “commerce” refers to “the exchange or buying and selling of commodities.” In
re Offer Space, LLC, 629 B.R. at 305; In re Blue, 630 B.R. at 188–89; In re Port Arthur Steam
Energy, L.P., 629 B.R. at 236–37. “Business” refers to “a usually commercial or mercantile
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activity engaged in as a means of livelihood,” or to “dealings or transactions especially of an
economic nature.” In re Offer Space, LLC, 629 B.R. at 305; In re Blue, 630 B.R. at 188–89;
Stevens, 667 B.R. at 436–37. “Dealings” refers to “friendly or business interactions,” and
“transactions” refers to “an exchange or transfer of goods, services, or funds.”15 Finally,
“activity” refers to “the quality or state of being active: behavior or actions of a particular kind.”
In re Offer Space, LLC, 629 B.R. at 305; In re Blue, 630 B.R. at 189; In re Port Arthur Steam
Energy, L.P., 629 B.R. at 236–37; In re Vertical Mac Constr., LLC, 2021 WL 3668037, at *3. The
activity need not be part of an operating business, need not be the debtor’s historical core
business, and need not satisfy a separate profit-motive requirement. See In re RS Air, LLC, 638
B.R. at 410–13.
From those definitions, the following rule emerges. The Court must identify the activity
in question and determine whether it is commercial or business under the ordinary meaning of
those terms. The word “activity” requires some action, behavior, or state of being active. A profit
motive is not required. But there still must be activity, and that activity must have a commercial
or business character. It must relate to commerce, commercial or mercantile activity, a means of
livelihood, or dealings or transactions especially of an economic nature.
Applying that rule here, the Debtors’ personally owned rental-property activity is
straightforward. As found above, the Debtors owned the rental properties in their individual
capacities, received rent personally, and reported rental-property-related income and activity in
their filings and monthly operating reports. That conduct qualifies as “activity” because it
involves behavior or actions related to leasing income-producing property. It is also
15 See Dealing, Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/dealing (last visited
Aug. 	31, 	2026); 	Transaction, 	Merriam-Webster.com 	Dictionary, 	https://www.merriam-
webster.com/dictionary/transaction (last visited Aug. 31, 2026).
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“commercial” or “business” in nature under the ordinary meaning of those terms. The activity
involved economic dealings or transactions and the use of property to generate income. The
Debtors’ personally owned rental-property activity thus satisfies the “commercial or business
activities” component of the “engaged in” requirement for purposes of this Opinion.
The pending Adams County Litigation presents a different question. Following the
analysis above, the only portion of the Adams County Litigation that remains available to the
Debtors for this part of the analysis is their defense of claims asserted against them personally,
including related appeals and proceedings undertaken on their own behalf. That portion of the
litigation qualifies as “activity.” It involved behavior or actions, including defending claims,
pursuing appeals, and participating in proceedings to determine, liquidate, or adjust alleged
liabilities. But activity alone is not enough. The activity must also be commercial or business in
nature. The Court acknowledges that the Adams County Litigation had a business-related origin
and subject matter. It arose from the failed Hauser business venture and concerned asserted
liability and disputed obligations arising from that venture. The relevant inquiry, however, is not
whether the litigation had a business history, but whether the Debtors’ own activity in that
litigation was commercial or business in nature.
The Debtors’ personal litigation activity does not satisfy the ordinary meaning of
“commercial” or “business” on this record. It was not activity in commerce, the buying or selling
of commodities, a commercial or mercantile activity engaged in as a means of livelihood, or a
“dealing” or “transaction” of an economic nature in the statutory sense. Nor was it the collection
or enforcement of the Debtors’ own business rights, the preservation or liquidation of their own
business assets, or the wind-down of their own commercial operations. It was a response to
alleged personal liability. A personal defense to alleged liability is therefore not, standing alone,
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“commercial or business” activity. Thus, the Debtors have not shown that their personal defense
of the Adams County Litigation was commercial or business activity.
The economic consequences of the litigation do not change that conclusion. The Court
recognizes that defending personal liability on claims arising from a failed business venture may
affect a debtor’s economic position. That effect, however, is not enough. Nearly every defense of
a monetary claim affects a debtor’s economic position. The relevant definition of “commercial or
business activity” refers to “dealings or transactions especially of an economic nature.” In
context, “dealings” refers to business interactions, and “transactions” refers to exchanges or
transfers of goods, services, or funds. The Debtors’ personal defense of alleged liability did not
involve an exchange or transfer of goods, services, or funds. Nor does its connection to an earlier
transaction, without more, make the defense itself a “business interaction” within the ordinary
meaning of that term. It was litigation activity undertaken to resist alleged personal liability.
Thus, the resulting economic consequences, without more, do not make that activity commercial
or business in nature.
That conclusion is also consistent with the structure of § 101(51D)(A). Treating the
Debtors’ own defense of guaranty liability as commercial or business activity merely because the
guarantee arose from or related to a separate entity’s business activity would permit the
commercial character of the entity’s activity to be attributed indirectly to the Debtors. That result
would create tension with the parenthetical, which identifies when the activities of a separate
entity may be treated as the debtor’s own. The statute should not be read to permit, through the
defense of guaranty liability, what the parenthetical does not permit directly through the activities
of the separate entity.16
16 Personal guarantees are a common feature of closely held business financing, and enforcement of those guarantees
often accompanies the financial distress of the underlying business. If the negotiation or defense of personal liability
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The same conclusion follows even if the Debtors’ personal exposure arose from conduct
alleged to be fraudulent, unauthorized, outside the scope of any agency relationship, or sufficient
to support veil-piercing or personal liability. Those theories may explain why the Debtors could
be held personally liable for obligations arising from failed business ventures, but they do not
establish that the Debtors were engaged in their own commercial or business activity. Personal
liability and personal commercial or business activity are distinct concepts. A finding that a
person acted outside the authority or protection of an entity may defeat limited liability or entity
separateness protections. But it does not convert separate-entity activity, or misconduct
connected to that activity, into “commercial or business activities” of the debtor under
§ 101(51D)(A).
Nor does the Court hold that litigation can never be commercial or business activity.
Litigation may qualify when it is part of the debtor’s own commercial or business affairs, such as
collecting receivables, enforcing business rights, preserving or liquidating business assets,
resolving claims arising from the debtor’s own business, or winding down the debtor’s own
commercial operations. The Debtors made no such showing here. To the extent the litigation
activity was conducted for, through, or on behalf of separate entities, it cannot be considered
because the condition stated in the parenthetical is not satisfied. To the extent the litigation
activity was the Debtors’ own personal defense against alleged liability, it does not satisfy the
requirement that the activity be commercial or business in nature.
Accordingly, of the activities considered, only the Debtors’ personally owned rental-
property activity qualifies as commercial or business activity for purposes of this Opinion. The
on a guarantee of a separate entity’s debt were sufficient, by itself, to establish an individual owner’s own commercial
or business activity, the parenthetical would lose much of its limiting force. The owner could often rely indirectly on
the commercial character of the separate entity’s business activity even though the entity itself is not also a debtor
under title 11.
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Adams County Litigation does not supply a qualifying commercial or business activity of the
Debtors on this record. Although portions of that litigation qualify as activity, it does not satisfy
the “commercial or business activities” component of the “engaged in” requirement.
2. 	Have the Debtors Established That Not Less Than 50 Percent of the Relevant
Debt Pool Arose from “the Commercial or Business Activities of the Debtor”?
Section 101(51D)(A) also contains a debt-composition requirement. It separately requires
that “not less than 50 percent” of the debtor’s “aggregate noncontingent liquidated secured and
unsecured debts as of the date of filing of the petition . . . (excluding debts owed to 1 or more
affiliates or insiders) . . . arose from the commercial or business activities of the debtor.” 11
U.S.C. § 101(51D)(A). For purposes of this analysis, the Court assumes, without deciding, that
the Debtors satisfy the statutory debt-limit requirement.
Applying the debt-composition requirement calls for three determinations. First, the
Court must identify the debtor’s aggregate noncontingent liquidated secured and unsecured debts
as of the petition date, excluding debts owed to affiliates or insiders. Second, the Court must
determine which debts in that pool arose from “the commercial or business activities of the
debtor.” Third, the Court must determine whether the debts identified in the second
determination constitute not less than 50 percent of the pool identified in the first determination.
The debtor bears the burden of establishing the debt-composition requirement, including each of
these determinations. See Stevens, 667 B.R. at 434; In re RS Air, LLC, 638 B.R. at 414; In re
Offer Space, LLC, 629 B.R. at 304; In re Ikalowych, 629 B.R. at 275.
The Debtors did not carry their burden on this requirement. They identify a debt pool that
excludes the asserted Hauser-related liabilities when addressing the Subchapter V debt limit, and
they assert generally that more than 50 percent of their debts arose from commercial or business
activity. But they do not identify which debts in that pool arose from “the commercial or
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business activities of the debtor,” nor do they compare the amount of those debts to that pool.
They rely instead on the business-related context and history underlying the Adams County
Litigation, as well as the size of the Hauser-related liabilities, to carry their burden. Section
101(51D)(A) requires more. It requires specific proof that the required percentage of debts arose
from commercial or business activities that may properly be treated as the Debtors’ activities, not
merely a general assertion that the debts arose from events with a business setting or history.
That failure is sufficient to defeat eligibility. The Court could end the analysis there. For
completeness, however, the Court will test the debt-composition requirement under assumptions
favorable to the Debtors. The Court is not required to reconstruct the Debtors’ statutory
calculation or supply proof they did not provide. But even when the record is viewed in that
favorable manner, the Debtors still have not established that not less than 50 percent of the
relevant debt pool arose from “the commercial or business activities of the debtor.”
a. 	What Is the Relevant Debt Pool?
The first determination concerns the relevant debt pool. Under § 101(51D)(A), that pool
consists of the Debtors’ aggregate noncontingent, liquidated, secured and unsecured debts as of
the petition date, excluding debts owed to affiliates or insiders.
Although the Debtors did not provide a complete debt-composition calculation, they
identified a debt figure of $758,048.23 when arguing that they satisfied the Subchapter V debt
limit. (Doc. 114.) That figure included the mortgage for their residence, an IRS claim, and other
non-Hauser unsecured debt. The Debtors did not include the asserted Hauser-related liabilities in
that figure. They disputed whether, and to what extent, the Hauser Parties’ liabilities were
noncontingent and liquidated as of the petition date. They also later argued that the debts asserted
by the Hauser Parties should be excluded because they were owed to affiliates or insiders.
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The Court need not decide whether either asserted basis for excluding the Hauser-related
liabilities is correct. For purposes of this analysis, the Court assumes, without deciding, that the
Debtors’ $758,048.23 non-Hauser figure is the relevant debt pool. That assumption accepts the
Debtors’ proposed exclusion of the Hauser-related liabilities without deciding whether any
particular liability was contingent or unliquidated, was owed to an affiliate or insider, or was
otherwise properly excluded from the statutory debt pool.
b. 	Which Debts Arose from “the Commercial or Business Activities of the
Debtor”?
Section 101(51D)(A) requires that not less than 50 percent of the relevant debt pool arose
from “the commercial or business activities of the debtor.” Courts have taken different
approaches to this requirement. Some courts read this debt-composition requirement together
with the “engaged in” requirement and require the relevant debts to arise from the same
“commercial or business activities” that satisfy the “engaged in” requirement. See, e.g., In re
Ikalowych, 629 B.R. at 287–88. The Court will refer to that approach as the same-activities view.
Other courts read the debt-composition requirement separately from the “engaged in”
requirement and do not require the relevant debts to arise from the same “commercial or business
activities” that satisfy the “engaged in” requirement. See, e.g., In re Blue, 630 B.R. at 191–96; In
re Reis, 2023 WL 3215833, at *4–6. The Court will refer to that approach as the separate-inquiry
view.
The choice between those views could matter here because the Debtors’ debt-composition
theory does not rest on the same activity that satisfies the “engaged in” requirement. On this
record, the only activity satisfying the “engaged in” requirement is the Debtors’ personally
owned rental-property activity. The Debtors, however, rely principally on the Hauser-related
liabilities associated with the Adams County Litigation and the failed Hauser business venture.
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Under the same-activities view, those liabilities cannot count toward the 50 percent requirement
because they did not arise from the rental-property activity. Under the separate-inquiry view, they
are not excluded for that reason alone, but they still must arise from commercial or business
activities properly treated as the Debtors’ activities under § 101(51D)(A). The Court must
therefore decide which view better fits the statute.
i. 	The Separate-Inquiry View Better Fits § 101(51D)(A)
Although courts have adopted both views, the separate-inquiry view better fits the
statutory language. The statute contains two relevant clauses corresponding to the two
requirements identified above. The “engaged in” clause asks whether the debtor is “engaged in
commercial or business activities.” 11 U.S.C. § 101(51D)(A). That clause is in the present tense
and asks what commercial or business activities the debtor was engaged in as of the petition date.
The debt-composition clause asks whether not less than 50 percent of the relevant debts “arose
from the commercial or business activities of the debtor.” Id. That clause is not in the present
tense. It is source-focused and backward-looking, asking which debts arose from the debtor’s
current or historical commercial or business activities. The two clauses therefore impose
different inquiries covering different time periods and potentially involving different activities.
Congress could have required the debts to arise from the same activities that satisfy the
“engaged in” requirement by referring to “those commercial or business activities,” “the same
commercial or business activities,” or “the commercial or business activities in which the debtor
is engaged as of the petition date.” It did not. Thus, although the repeated phrase “commercial or
business activities” carries the same substantive meaning in both clauses, the requirements
imposed by those clauses need not be satisfied by the same activities. The separate-inquiry view
accounts for that distinction; the same-activities view does not.
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This conclusion does not convert the debt-composition requirement into a general
business-connection test. The separate-inquiry view permits the Court to consider debts arising
from historical commercial or business activities different from the activities satisfying the
“engaged in” requirement. But two limits remain. First, the activities must still be commercial or
business in nature. A debt does not satisfy the requirement merely because it has a business
background, arose in a business setting, was asserted against the debtor personally, or has
economic consequences for the debtor.17 Second, the debt must arise from the commercial or
business activities “of the debtor.” 11 U.S.C. § 101(51D)(A). As explained above, that phrase
refers to the debtor’s own commercial or business activities and, where the condition stated in
the parenthetical is satisfied, the activities of an affiliate that is also a debtor under title 11.
The separate-inquiry view also better serves Subchapter V’s purpose. Subchapter V
addresses small-business distress. Its purpose is not limited to commercial or business activity
existing exactly as it did on the petition date. Over time, the debtor’s own commercial or
business activity, or that of a qualifying affiliate that is also a debtor under title 11, may change,
wind down, or cease before bankruptcy relief is sought. The debtor may therefore carry debt
from commercial or business activities other than those that it was engaged in on the petition
date. A rule requiring the relevant debt to arise from the same activities that establish the
“engaged in” requirement would exclude those debts merely because the business activity
changed form, ceased active operations, or was not the precise activity on the petition date. That
reading is too narrow to serve Subchapter V’s purpose.
17 In re Reis illustrates this limit. Although the court adopted the separate-inquiry view, it held that the debtor’s medical
school loans did not arise from her commercial or business activities. In re Reis, 2023 WL 3215833, at *4–7. The
debtor incurred the loans to obtain the education and license that later allowed her to practice medicine, and she
eventually opened her own medical practice. Even so, the court concluded that the loans did not satisfy § 101(51D)(A).
Id. at *6–7. In re Reis therefore shows that, even under the separate-inquiry view, a debt does not qualify merely
because it has a causal, historical, or economic connection to commercial or business activity.
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For those reasons, the Court adopts the separate-inquiry view. The relevant debts need not
arise from the same commercial or business activities that satisfy the “engaged in” requirement.
But they must arise from commercial or business activities that may be treated as the debtor’s
activities under § 101(51D)(A). Separate-entity activities may be treated as the debtor’s activities
for purposes of the debt-composition requirement only if the condition stated in the parenthetical
is satisfied.
ii. 	Application of the Separate-Inquiry View
Applying that rule here, the Debtors’ reliance on the Hauser-related liabilities presents a
threshold problem. For purposes of identifying the relevant debt pool, the Court has assumed that
the Debtors’ $758,048.23 non-Hauser figure is controlling. Under that assumption, the Hauser-
related liabilities are outside the relevant debt pool and therefore cannot count toward the 50
percent requirement. The Court could therefore limit its analysis to the non-Hauser debts.
For completeness, however, the Court will consider the Hauser-related liabilities as
though they were included in the relevant debt pool. Even so, the Debtors must show that those
liabilities arose from commercial or business activities that may be treated as the Debtors’
activities under § 101(51D)(A). They have not made that showing.
That conclusion follows from the Court’s earlier analysis of which activities may be
treated as the Debtors’ own and whether those activities are commercial or business in nature.
The Hauser-related liabilities arose, at most, from the failed Hauser business venture, alleged
misconduct connected to that venture, personal guarantees of obligations connected to that
venture, litigation conduct, or activity conducted for, through, or on behalf of separate entities.
Those connections are insufficient. A business setting is not enough. Personal liability is not
enough. Litigation conduct is not enough. Nor does reducing a claim to judgment change the
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source of the debt for purposes of § 101(51D)(A). The relevant question is whether the debt
arose from commercial or business activities that may be treated as the Debtors’ activities. For
the reasons already discussed, the Debtors have not made that showing. Activity conducted for,
through, or on behalf of the separate entities cannot be attributed to the Debtors because the
condition stated in the parenthetical is not satisfied. Their personal defense of the resulting
liability does not itself constitute commercial or business activity. And the Debtors have not
shown that the execution of the guarantees or any alleged misconduct giving rise to personal
liability independently constituted qualifying commercial or business activities of the Debtors
from which the Hauser-related liabilities arose.
The residence-related debts and attorney-fee debts also do not count. The record
identifies 98 East Broadway as the Debtors’ residence, not as rental or investment property. The
Debtors therefore have not shown that either the Members 1st mortgage debt secured by that
property or the Adams County tax debt on that property arose from their personally owned
rental-property activity or any other qualifying commercial or business activity. Nor have they
shown that the attorney-fee debts owed to Mette, Evans & Woodside or Smigel, Anderson &
Sacks arose from qualifying activity. Those obligations appear to arise from legal services
rendered in connection with the Adams County Litigation. But the Court has already concluded
that the Debtors’ personal litigation activity does not constitute qualifying commercial or
business activity under § 101(51D)(A). To the extent any portion of those fees instead relates to
litigation involving the Debtors’ separate business entities, the Debtors likewise have not shown
that the underlying activity is attributable to them under the parenthetical.
That leaves, at most, a limited group of non-Hauser debts that the Court will treat
favorably to the Debtors for purposes of the final determination. The Court assumes, without
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deciding, that the following debts, whether reflected in the claims register or scheduled as
undisputed, liquidated, and noncontingent, arose from commercial or business activities properly
treated as the Debtors’ activities: the M&T Bank claim ($19,829.13), the American Express
claim ($33,810.38), the IRS claim ($77,553.42), the Dunes Real Estate claim ($5,250.00), the
Members 1st credit-card claim ($4,977.91), the Adams County tax claim on 30–32 West Middle
Street ($11,442.73), and the Adams County tax claim on Parcel No. 07F09-0037E ($2,095.13).
The aggregate amount of these debts is $154,958.70. The Court makes no finding that any or all
of those debts actually arose from the Debtors’ qualifying commercial or business activities. It
considers them only to test the Debtors’ position under the most favorable view reasonably
available from the record.
Accordingly, for purposes of the final determination, the debts treated as arising from
“the commercial or business activities of the debtor” total $154,958.70. The Court next considers
whether those debts constitute not less than 50 percent of the assumed debt pool.
c. 	Did Those Debts Constitute Not Less Than 50 Percent of the Assumed Debt
Pool?
The final determination requires a simple comparison. The Court has assumed, for
purposes of this analysis, that the relevant debt pool is $758,048.23. To satisfy the debt-
composition requirement, the Debtors had to establish that at least $379,024.12 of that amount
arose from commercial or business activities properly treated as the Debtors’ activities under
§ 101(51D)(A). But the debts the Court treats as arising from “the commercial or business
activities of the debtor” total only $154,958.70. Because that amount falls $224,065.42 short of
the amount required, the Debtors have not shown that not less than 50 percent of the assumed
debt pool arose from “the commercial or business activities of the debtor.” They therefore have
not established the debt-composition requirement of § 101(51D)(A).
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C. Confirmation Must Be Denied, and the Motion Is Moot
The Debtors have not established that they are small business debtors under
§ 101(51D)(A). They therefore have not established that they are eligible debtors for purposes of
Subchapter V. See 11 U.S.C. § 1182(1). That conclusion controls confirmation. Only a debtor
eligible to proceed under Subchapter V may obtain confirmation of a Subchapter V plan. See 11
U.S.C. §§ 1189(a), 1191. Because the Debtors have not established their eligibility to proceed
under Subchapter V, the Plan does not comply with the applicable provisions of the Bankruptcy
Code, and the Debtors have not satisfied the requirements for confirmation. See 11 U.S.C.
§§ 1129(a)(1), (a)(2), 1191(a), (b).
Confirmation of the Plan will therefore be denied. The Court will also enter an order
determining that the Debtors’ Subchapter V designation is incorrect.18 That determination is
consistent with Federal Rule of Bankruptcy Procedure 1020(a), under which the case proceeds
according to the Debtors’ designation “unless and until the court issues an order finding that the
statement is incorrect.” The case will proceed as a Chapter 11 case to which Subchapter V does
not apply, unless otherwise ordered. Because the Court resolves the eligibility dispute in the
confirmation context and will enter an order determining that the Debtors’ Subchapter V
designation is incorrect, the Court need not decide whether the Hauser Parties may obtain
separate relief under Federal Rule of Bankruptcy Procedure 1009(a)(2), notwithstanding the
expiration of the Rule 1020(b) deadline. The Motion will therefore be denied as moot to the
extent it seeks separate relief compelling amendment of the petition or revoking the Subchapter
V designation.
18 This determination is made after notice and an opportunity to be heard. The Debtors’ Subchapter V eligibility was
raised in the confirmation objections and in the Motion. The Debtors responded to those filings, the Court directed
further briefing on eligibility, and the parties were heard at argument.
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Before concluding, the Court makes the following observation. This result does not mean
that individual owners of closely held business entities are categorically unable to obtain
Subchapter V relief when their business affairs are conducted through separate entities. It means
only that the statutory conditions for relying on separate-entity activity must be satisfied. A
different case would be presented if the relevant business entity were itself a debtor under title 11
and the debtor established that the entity satisfied the condition stated in the parenthetical in
§ 101(51D)(A). But that is not this case. The Debtors seek to rely on the activities of separate
entities that are not debtors in this bankruptcy case and whose eligibility, assets, operations,
creditors, and reorganization needs are not before the Court. Section 101(51D)(A) does not
permit the Court to treat those non-debtor entities’ activities as the Debtors’ own merely because
the Debtors need bankruptcy relief or because those activities form the background of the
Debtors’ financial distress.
IV. 	CONCLUSION
The Debtors seek confirmation of a plan under Subchapter V. To obtain that relief, they
must establish that they are eligible Subchapter V debtors. That requires proof that they are
“small business debtors” within the meaning of § 101(51D)(A), as incorporated by § 1182(1).
The absence of a timely objection under Federal Rule of Bankruptcy Procedure 1020(b) does not
relieve the Debtors of that burden at confirmation.
At most, the Debtors established that their personally owned rental-property activity may
be treated as their own commercial or business activity for purposes of this Opinion. They did
not establish that the Adams County Litigation supplied qualifying commercial or business
activity of the Debtors. Nor did they establish that the personal guarantees, judgment-related
debt, or other Hauser-related liabilities arose from qualifying commercial or business activities of
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the Debtors. To the extent those matters involved activities conducted for, through, or on behalf
of separate entities, the Debtors did not establish that those activities may be attributed to them
under the condition stated in the parenthetical in § 101(51D)(A).
Nor did the Debtors establish the 50 percent debt-composition requirement. Even
assuming without deciding that the Debtors satisfy the statutory debt-limit requirement, they
failed to show that not less than 50 percent of the assumed debt pool arose from their personally
owned rental-property activity or from any other commercial or business activity properly treated
as the Debtors’ activities under § 101(51D)(A). They therefore have not established that they are
small business debtors under § 101(51D)(A), as incorporated by § 1182(1).
Because the Debtors have not established their eligibility to proceed under Subchapter V,
the Plan cannot be confirmed under § 1191. Confirmation of the Plan will be denied. The Court
will also enter an order determining that the Debtors’ Subchapter V designation is incorrect, and
the case will proceed as a Chapter 11 case to which Subchapter V does not apply, unless
otherwise ordered. Because the Court resolves the eligibility dispute in connection with
confirmation and will enter an order determining that the Debtors’ Subchapter V designation is
incorrect, the Court need not decide whether the Hauser Parties may obtain separate relief under
Federal Rule of Bankruptcy Procedure 1009(a)(2), notwithstanding the expiration of the Rule
1020(b) deadline. The Motion will therefore be denied as moot to the extent it seeks separate
relief compelling amendment of the petition or revoking the Subchapter V designation.
An appropriate order will follow.
By the Court,
____________________________________
Henry W. Van Eck, Chief Bankruptcy Judge
Dated: August 31, 2026
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