KB Toys And The Trade Claims Playing Field

Law360, New York (June 12, 2012, 2:35 PM EDT) -- On May 4, 2012, in the KB Toys case, Bankruptcy Judge Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware disallowed certain trade claims purchased on the secondary market because the sellers of those claims had not repaid their preference liability.[1]

In so ruling, the court concluded that Section 502(d) of the Bankruptcy Code — which provides for the disallowance of any claim of any entity that is a transferee of a preferential or fraudulent transfer unless it has repaid the...
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