Deeply Subordinated Creditor Lacks Standing to Participate in Plan Confirmation
Section 510 of the Bankruptcy Code recognizes that agreements between creditors of a debtor that one creditor's claim will be subordinated in payment to another creditor's claim will be enforceable in a bankruptcy case.
June 07, 2021 at 11:02 AM
9 minute read
Section 510 of the Bankruptcy Code recognizes that agreements between creditors of a debtor that one creditor's claim will be subordinated in payment to another creditor's claim will be enforceable in a bankruptcy case. As is often the case, over the years bankruptcy and finance practitioners expanded the concept of payment subordination in these agreements to include many terms anticipating any and every action and right the subordinated creditor may take or have in the bankruptcy case. So what provisions in a subordination agreement can be enforced, and can the subordinated creditor participate in the reorganization process if there is no prospect it will receive any distribution as a result of being subordinated?
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