11 U.S.C. § 747

Subordination of certain customer claims

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Except as provided in section 510 of this title, unless all other customer net equity claims have been paid in full, the trustee may not pay in full or pay in part, directly or indirectly, any net equity claim of a customer that was, on the date the transaction giving rise to such claim occurred—(1) an insider;(2) a beneficial owner of at least five percent of any class of equity securities of the debtor, other than—(A) nonconvertible stock having fixed preferential dividend and liquidation rights; or(B) interests of limited partners in a limited partnership;(3) a limited partner with a participation of at least five percent in the net assets or net profits of the debtor; or(4) an entity that, directly or indirectly, through agreement or otherwise, exercised or had the power to exercise control over the management or policies of the debtor.(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2613; Pub. L. 97–222, § 13, July 27, 1982, 96 Stat. 238.)Historical and Revision Notessenate report no. 95–989

Section 747 subordinates to other customer claims, all claims of a customer who is an insider, a five percent owner of the debtor, or otherwise in control of the debtor.

Editorial NotesAmendments

1982—Pub. L. 97–222 substituted “the transaction giving rise to such claim occurred” for “such claim arose” in provisions preceding par. (1).

Notes of Decisions

Cited in 7 cases, 1981–2015 · leading case: Garafano v. Trs. of the Amalgamated Ins. Fund (In Re Garafano), 99 B.R. 624 (Bankr. E.D. Pa. 1989).

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Garafano v. Trs. of the Amalgamated Ins. Fund (In Re Garafano), 99 B.R. 624 (Bankr. E.D. Pa. 1989). “§ 502 ; to subordinate claims, 11 U.S.C. § 747 ; and to avoid preferential and fraudulent transfers, 11 U.”

United States v. Lee, 89 B.R. 250 (N.D. Ga. 1987). “This ability to obtain a discharge of general student loans under § 1328(a) is in contrast to the other discharge provisions of the bankruptcy code, 11 U.S.C. §§ 747 , 1141, 1228(a) and (b), and 1328(b), which, pursuant to 11 U.”

Matter of Dan-Ver Enter., Inc., 60 B.R. 568 (Bankr. W.D. Pa. 1986). “11 U.S.C. § 747 . Furthermore, insiders can only be impaired to the extent that they received a preferential benefit within one year prior to the filing of the bankruptcy petition.”

United States Tr. v. Franz (In re Franz), 540 B.R. 765 (Bankr. D. Mont. 2015). “The Plaintiff satisfied its burden to show, by a preponderance of the evidence, that the Debtor’s discharge should be revoked under 11 U.S.C. § 747 (d)(2) for Franz’s knowingly and fraudulently failing to report the acquisition of property of the estate, or to deliver or…”

In the Matter of Jill Klein Zwart, Debtor. Louis J. Herbert, Inc. & Thomas Barr, IV v. Jill Klein Zwart, 722 F.2d 1258 (5th Cir. 1984). “filed a Proof of Claim, and there *1260 after, on April 22,1981, filed a complaint in the bankruptcy court against Zwart and the Whitney Bank, contending that the March 16, 1981 order authorizing the collateral mortgage was granted on a misrepresentation about the non-existence…”

In Re ESM Gov't Sec., Inc., 52 B.R. 372 (S.D. Fla. 1985). “§ 742 ; insider claims are automatically subordinated, 11 U.S.C. § 747 ; and the trustee has an additional avenue for voiding preferencial transfers, 11 U.”

Sun Bank of Wilton Manor v. Nigro (In re Nigro), 18 B.R. 400 (Bankr. S.D. Florida 1981). “1) the plaintiff apparently objected to discharge under 11 U.S.C. § 747 without making reference to that section of the statute.”

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