The Eighth Circuit’s Bankruptcy Appellate Panel today held that bankruptcy courts may grant "derivative standing" to creditors to pursue avoidance and preference claims that the debtor or its trustee refuses to bring. The BAP also concluded that, regardless of bankruptcy court approval, a creditor has standing to prosecute objections to other creditors’ priority claims and to seek their equitable subordination. The Panel thus reversed the bankruptcy court’s dismissal of a creditor’s complaint in part and affirmed it in part. PW Enterprises, Inc. v. State of North Dakota, No. 06-6058 (8th Cir. BAP Mar. 9, 2007).
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