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Deeping Insolvency: A Cause Of Action, A Tool Of Measuring Damages, Or Nothing At All?, Nicholas Santoro

Bankruptcy Research Library

(Excerpt)

“Deepening Insolvency” is a rather new theory of either liability or damages in cases brought by a plaintiff (typically a bankruptcy trustee, litigation trust, or some other party “filling in” for an insolvent corporation, or debtor) against directors, officers, attorneys, or other professionals, based on their dealings with the debtor. “Deepening insolvency” has been defined as “injury to the debtors' corporate property from the fraudulent expansion of corporate debt and prolongation of corporate life.” The theory of deepening insolvency has become a highly debated by attorneys, creditors, and the courts.

The courts, both state and federal, have continued to …