Perry v. Commerce Loan Co.,
383 U.S. 392 (1966)

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U.S. Supreme Court

Perry v. Commerce Loan Co., 383 U.S. 392 (1966)

Perry v. Commerce Loan Co.

No. 694

Argued January 26, 1966

Decided March 7, 1966

383 U.S. 392


Petitioner sought confirmation of his plan for an extension of time to pay his debts out of future wages, pursuant to Chapter XIII of the Bankruptcy Act. On motion of respondent, a creditor, the referee dismissed the plan on the ground that petitioner's discharge in a straight bankruptcy proceeding within six years of this proceeding barred confirmation under § 14(c)(5) of the Act. That section provides for discharge unless the bankrupt has,

"within six years prior to bankruptcy, been granted a discharge, or had a composition or an arrangement by way of composition or a wage earner's plan by way of composition confirmed under this Act. . . ."

Section 656(a)(3) requires confirmation of a wage earner's extension plan if

"the debtor has not been guilty of any of the acts or failed to perform any of the duties which would be a bar to the discharge of the bankrupt. . . ."

The District Court upheld the referee's dismissal, and the Court of Appeals affirmed.


1. Confirmation of a wage earner extension plan is not barred under § 14(c)(5) of the Bankruptcy Act by a discharge in bankruptcy within the previous six years. Pp. 383 U. S. 394-402.

(a) Congress has clearly intended by Chapter XIII to encourage the use of wage earner extension plans by which debtors arrange to pay their debts in full, rather than go into straight bankruptcy or composition. Pp. 383 U. S. 394-397.

(b) The purpose of the six-year bar, which was enacted long before the adoption of Chapter XIII, was to prevent the creation of habitual bankrupts (i.e., debtors who escape their obligations by repeated bankruptcy), and is completely opposed to the purpose of the wage earner extension plan, whereby the debtor meets the claims of his creditors. Pp. 383 U. S. 399-400.

(c) The ambiguous language used in § 656(a)(3) concerning "guilty" acts and unfulfilled duties impels recourse to the legislative purposes of the Act. Pp. 383 U. S. 400-401.

(d) The absence of legislative history bearing on the adoption in Chapter XIII of § 656(a)(3) indicates that its inclusion was

Page 383 U. S. 393

a legislative oversight, at least insofar as it bears on wage earners' extension plans. P. 383 U. S. 401.

2. This Court's construction that the six-year bar is inapplicable to wage earner extension plans does not preclude application of § 14(c)(5) to confirmations of general arrangements under Chapter XI, real property arrangements under Chapter XII, and to wage earner compositions under Chapter XIII. Pp. 383 U. S. 402-403.

3. If a wage earner is unable to comply with his extension plan and seeks discharge under § 661, thus transposing the extension plan into a composition, the six-year bar would apply. P. 383 U. S. 404.

340 F.2d 588 reversed and remanded.

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