Equitable Subordination

An equitable remedy under Bankruptcy Code § 510(c) which allows bankruptcy courts to (a) subordinate any claim to any other claims; and (b) transfer a secured lender’s lien to the debtor’s bankruptcy estate for the benefit of all creditors, or both.

Equitable subordination is often applied where a court finds that a secured lender acted inequitably toward a debtor by exercising undue influence or control over the debtor and its business, or engaging in fraud.

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