3 Cautionary Tales For Buyers Of Bankruptcy Claims

Law360 (July 19, 2018, 12:46 PM EDT) -- Claims trading has become increasingly commonplace in today's bankruptcy cases, typically with little need for policing by the courts. Investors often purchase claims as a means by which to execute recovery or acquisition strategies, with the understanding that they generally acquire those claims subject to any infirmities.[1] Beyond that, courts have provided little guidance regarding other problems that might affect the use of claims purchased for strategic reasons.

Recently, this dynamic has begun to change. In recent decisions, three courts reviewed claims trading activity and emphasized the need for buyers to exercise care when purchasing claims. Based on these decisions, which...

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