Chapter 7 Trustee Can Abandon Looting Claims Back to Creditors Who Had Them Before the Bankruptcy

A creditor on behalf of a company sues its controllers and advisers for looting the company, and the company files for bankruptcy, which stays the litigation and shifts the authority to pursue the claims from the creditors to a Chapter 7 trustee. What happens to those claims if the trustee decides not to pursue them? Barry Klayman and Mark Felger, writing in the Delaware Business Court Insider, discuss  a recent decision by U.S. Court of Appeals for the Third Circuit holding that if the trustee abandons those claims, they revert back to the creditors who had them before the bankruptcy.

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Mark E. Felger

Co-Chair, Bankruptcy, Insolvency & Restructuring

(302) 295-2087

Barry M. Klayman

Of Counsel

(302) 295-2035

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