Bankruptcy experts examine conflicting views of debt recharacterization
The August 2007 issue of The Business Lawyer, Volume 62, includes an article by Jim Wilton and Steve Moeller-Sally, a partner and associate, respectively, in the firm's Bankruptcy & Business Restructuring Group. In the article, "Debt Recharacterization Under State Law," the authors argue that the doctrine of debt recharacterization "imposes inconsistent and sometimes irrational standards on insiders who wish to support their business enterprises through periods of financial distress." They examine three conflicting lines of federal cases applying the doctrine and, using examples from Massachusetts and Wisconsin, conclude that "state law offers a higher degree of predictability concerning the enforcement of insider debt and may serve as a means for reconciling the conflicting and inconsistent tests applied by the federal courts." If you would like to read the article, please click here.
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