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Case Study: In Re Northstar Development

Law360, New York (May 2, 2012, 1:29 PM EDT) -- A recent opinion from the United States Bankruptcy Court for the Western District of New York shows that even the best laid strategies can return to haunt the insiders of a debtor. In Wallach v. Buchheit (In re Northstar Development Corp.),[1] the court equitably subordinated most of the $3.2 million unsecured claim of the debtor's sole shareholder (the "principal") because he delayed the debtor's bankruptcy filing in order to save himself from $100,000 in preference liability.   

The court held that "[b]y causing the debtor to...
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