The Demise of Equitable Disallowance of Claims

October 20, 2015

Otterbourg attorneys, Melanie Cyganowski, former Chief Judge of the Bankruptcy Court for the Eastern District of New York and Lloyd Green provide an analysis of developments related to Section 502 of the Bankruptcy Code which governs the allowance and disallowance of claims led in bankruptcy cases.  While section 502(b) lists nine separate grounds for disallowing claims, it does not mention equitable considerations or a claimant's bad conduct as bases for claim disallowance.

Because of — or despite — the section's silence regarding equitable disallowance, the question of whether a bankruptcy court may disallow claims on equitable grounds has historically been an open issue, with courts arriving at opposing conclusions.

But, according to the authors, equitable disallowance is now under a cloud.  Read the balance of the article here.