September 2008
Equitable Subordination Still Requires Proof of HarmBy Michael L. Cook
The U.S. Court of Appeals for the Fifth Circuit reversed a bankruptcy court’s equitable subordination order on June 20, 2008. ccording to the court, subordination of the insiders’ secured claims was "inappropriate" because the bankruptcy trustee had failed to show that the defendant insiders’ "loans to the debtor harmed either the debtor or the general creditors." This article discusses the repercussions of that ruling.
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