Category Archives: Equitable Subordination

Illinois Bankruptcy Court Articulates Low Threshold for Equitable Subordination of Insider Secured Loan

For a distressed company running low on capital, an investment from insiders may represent a last best hope for survival. Insiders may be willing to risk throwing good money after bad for a chance to save the company even when any third party would stay safely away. Insiders  of a failing company may also have an ulterior motive for making an eleventh hour capital infusion, as they may use their control over a distressed company to enhance their position relative to the company’s other creditors. The line between a good faith rescue and bad faith self-dealing is often a hazy one. Continue reading

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Filed under Bankruptcy litigation, Equitable Subordination