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Claim Trading Update: Third Circuit Holds that Section 502(d) Disallowance Runs with the Claim
26 November 2013
In re KB Toys Inc
., the Third Circuit recently held that trade claims subject to disallowance under section 502(d) of the Bankruptcy Code are disallowable “no matter who holds them.” The Third Circuit affirmed Bankruptcy and District Court decisions holding that trade claims subject to disallowance in the hands of an original claimant remain disallowable in the hands of a subsequent transferee.
directly conflicts with the decision for the District Court of the Southern District of New York in
In re Enron Corp
., which held that disallowance is a personal disability of a claimant, not an attribute of a claim.
In light of
, claim purchasers should be sure to perform due diligence on both the claims they acquire and the creditors with whom they are trading.
Richard F. Hahn
M. Natasha Labovitz
George E.B. Maguire
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