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The 3rd U.S. Circuit Court of Appeals invalidated a widely used mechanism by which Chapter 11 creditors could, with bankruptcy court permission, sue to avoid fraudulent transfers. The court affirmed a finding that creditors are not proper parties to bring avoidance claims under 11 U.S.C. 544(b). The ruling makes the 3rd Circuit the first to disallow such suits, which are lodged when debtors fail to bring avoidance claims.
October 01, 2002 at 12:00 AM
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The original version of this story was published on Law.Com
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