Noninsider Risk Of Equitable Subordination

Law360, New York (September 8, 2009, 12:22 PM EDT) -- Although courts are generally reluctant to equitably subordinate claims of noninsiders, the United States Bankruptcy Court for the District of Montana recently did just that to the claims of a noninsider lender based on overreaching and self-serving conduct in Credit Suisse v. Official Committee of Unsecured Creditors (In Re Yellowstone Mt. Club LLC), Case No. 08-61570-11, Adv. No. 09-00014 (Bankr. D. Mont. May 13, 2009).

Equitable subordination is governed by section 510(c) of the Bankruptcy Code and permits the bankruptcy court to subordinate all or part...
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