Recharacterization Doctrine Is Ripe For High Court Review

Law360, New York (July 8, 2015, 10:07 AM EDT) -- When a bankruptcy court "recharacterizes" debt, it causes something the parties have identified as debt to be converted into equity. Unlike an equitable subordination analysis, in which courts determine whether an acknowledged claim should be subordinated to that of other creditors due to a creditor's inequitable conduct, a recharacterization analysis involves determining whether a debt actually exists.

There is a split of federal circuit court authority on a fundamental tenet of the recharacterization doctrine. As discussed in the Tenth Circuit's recent opinion in In re Alternative Fuels, 14-3086, 10th Circuit, June 12, 2015, the circuit courts are divided on the question...

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