Wednesday, October 22, 2008

New Illinois Bankruptcy caselaw

In re: Kreisler, No. 06-3881 (10/20/08). Appeal, N.D. Ill., E. Div. Reversed and remanded.
Bankruptcy Court erred in invoking doctrine of equitable subordination to essentially reduce priority of claim that debtors had purchased at discount from secured creditor. Bankruptcy rules allow creditors to sell their claims in bankruptcy estate, and said doctrine should not have been invoked since there was no evidence that debtors' purchase of secured claim harmed any other creditor. Moreover, debtors do not otherwise owe fiduciary duties to their creditors.