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Subrogation Claims in Bankruptcy

By Adam L. Rosen and Kristina M. Wesch
November 29, 2005

In many cases, a creditor in a bankruptcy case (the 'Primary Creditor') has the benefit of a guaranty, an escrow, or a letter of credit provided by a third party (the 'Subrogee') to which it can turn in order to satisfy its claim against the debtor. When the Subrogee pays the debtor's obligation to the Primary Creditor after the debtor has filed a petition in bankruptcy, the Subrogee will in most cases be entitled to assert a subrogation claim against the debtor in the bankruptcy case. Below, we discuss the relevant considerations in determining whether a subrogation claim is valid.

Subrogation

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