Debt Recharacterization | Practical Law

Debt Recharacterization | Practical Law

Debt Recharacterization

Debt Recharacterization

Practical Law Glossary Item 2-382-3386 (Approx. 2 pages)

Glossary

Debt Recharacterization

A doctrine allowing bankruptcy courts to treat a "loan" as an equity investment if the facts indicate that the loan was in reality a capital contribution. This cause of action is usually brought against shareholders or other insiders who, before bankruptcy, extended loans to distressed companies on very forgiving terms.