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The Bankruptcy StrategistLJN NewslettersNewsSections

Deepening Insolvency Trend Expands to Delaware

By Luis Salazar
November 01, 2003

Spurred on by the current economic downturn, the use and acceptance of deepening insolvency as a cause of action in the bankruptcy arena continues to become more established and recognized. The Third Circuit already aided this development by recognizing deepening insolvency as a cause of action under Pennsylvania law in Official Committee of Unsecured Creditors v. R.F. Lafferty & Co., Inc., 267 F.3d 340 (3d Cir. 2001). Now, the Delaware Bankruptcy Court in In re Exide Technologies, Inc., 2003 WL 22079513 (August 21, 2003) has recognized deepening insolvency — this time as a valid cause of action under Delaware law – in a lawsuit by an unsecured creditors committee against lenders of a bankrupt company.

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