Kham & Nate's Shoes Number 2, Inc. v. First Bank of Whiting
United States Court of Appeals for the Seventh Circuit
908 F.2d 1351 (1990)
Relevant factsFree
First Bank (defendant) agreed to extend K&N (plaintiff), then in Chapter 11 bankruptcy, an additional secured $300,000 line of credit, explicitly reserving the right to terminate further advances on five days' notice; after K&N drew $75,000, First Bank gave notice terminating further advances. The bankruptcy court found this termination inequitable and subordinated First Bank's security interest to other creditors, and First Bank appealed.
IssueFree
Whether, under bankruptcy law, a creditor's claim may be subordinated if the creditor properly exercised its rights under a loan agreement without attempting to gain an unfair advantage.
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