Equitable Subordination

Equitable subordination is a legal principle used in bankruptcy and creditor-debtor relationships. It allows a court to adjust the priority of claims, placing some creditors lower in the repayment order than they would normally be. This typically happens if a creditor engaged in unfair behavior, like intentionally harming other creditors or taking advantage of their position. Essentially, it ensures fairness by addressing situations where a creditor's actions are deemed inequitable, protecting the interests of other creditors and maintaining the integrity of the financial system.