John Matthew Ikalowych, 629 B.R. 261

Background

Debtor John M. Ikalowych filed Chapter 11 and elected Subchapter V on November 20, 2020; schedules show $7,396,750.09 aggregate debt (below the $7.5M CARES-Act cap).
Debtor wholly owns JMI Management, LLC (JMI), which in turn owns a 30% interest in Lyceum Hailco, LLC (Hailco); Debtor served as manager of both entities.
Hailco ceased operations and surrendered assets to its lender in October 2020; Debtor performed ongoing unpaid "wind down" tasks before and after the petition (~12 hours/month).
Weeks before filing, Debtor began employment as a salaried commercial insurance producer at CCIG and continued post-petition; he has no ownership interest in CCIG.
Most of Debtor’s liabilities (~$6.39M of $7.4M) derive from personal guarantees of Hailco’s debts (including an unconditional guarantee to Sunflower Bank for Hailco loans).
The U.S. Trustee and Sunflower Bank objected to Subchapter V eligibility, arguing Debtor was not "engaged in commercial or business activities" as of the petition date; Debtor and the Subchapter V Trustee argued he was.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an individual debtor is a "person engaged in commercial or business activities" under 11 U.S.C. § 1182(1)(A) as of the petition date	UST/Sunflower: Debtor was not engaged in business on petition date (Hailco had ceased operations; JMI passive); thus not eligible	Debtor: Indirect ownership of Hailco through JMI, managerial role, wind-down work, and new employment constitute commercial activities	Held: Debtor was engaged in commercial or business activities (JMI ownership/management, Hailco wind-down, and CCIG employment) as of the petition date; requirement met
Temporal scope of "engaged in" — must it be present activity at petition date?	UST: "Engaged in" should be read as present-tense at petition date	Debtor: Broader view — prior business activity or residual connections suffice	Held: "Engaged in" requires assessing the debtor's status as of the petition date (with consideration of immediately preceding/subsequent circumstances);Court applies a totality-of-the-circumstances test
Whether wage employment (CCIG) or indirect/minority ownership (via JMI) qualifies as "commercial or business activities"	UST: Wage employment or passive/minority indirect ownership should not suffice	Debtor: Both salaried private-sector work and non-passive ownership/management are commercial activities	Held: Both count; private-sector wage employment and non-passive ownership/managerial acts fall within the phrase's broad ordinary meaning
Whether at least 50% of debts "arose from the commercial or business activities of the debtor"	UST: Debts derive from Hailco (the company), not the individual; therefore they did not arise from Debtor's own commercial activities	Debtor: Majority of debts stem from guarantees made to support Hailco — directly related to his business interests	Held: Debtor met the 50% test — ~86% of debts arose from guarantees and business activities tied to JMI/Hailco

Key Cases Cited

Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) (ordinary/plain meaning controls statutory interpretation)
United States v. Ron Pair Enters., Inc., 489 U.S. 235 (1989) (textualist approach to Bankruptcy Code interpretation)
Clark v. Rameker, 573 U.S. 122 (2014) (use of dictionary/plain meaning in Bankruptcy Code context)
Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017) (grammatical role of past participles in statutory text)
Republic of Argentina v. Weltover, 504 U.S. 607 (1992) (interpretation of "commercial activities" focusing on nature of act)
Saudi Arabia v. Nelson, 507 U.S. 349 (1993) (FSIA commercial-activity analysis emphasizing market-like conduct)
In re Woods, 743 F.3d 689 (10th Cir. 2014) ("arose from" requires direct and substantial connection in related bankruptcy contexts)
In re Pittsburgh & Lake Erie Properties, Inc., 290 F.3d 516 (3d Cir. 2002) ("engaged in" construed as present-tense for eligibility determinations)