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11 U.S.C. § 747 — Subordination of certain customer claims
Federal law — U.S. Code and appendices · legal_authorities
Except as provided in [section 510 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section510&num=0&edition=prelim), 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.
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Source file: Laws/federal/codes/united-states-code/title-11/section-747-subordination-of-certain-customer-claims--85e5560f4f.md
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Source location: Title 11, Chapter 7, § 747; chapter-007-liquidation.md
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Except as provided in [section 510 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section510&num=0&edition=prelim), 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.
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Federal law — U.S. Code and appendices · legal_authorities
**(a)** A subordination agreement is enforceable in a case under this title to the same extent that such agreement is enforceable under applicable nonbankruptcy law.
**(b)** For the purpose of distribution under this title, a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 on account of such a claim, shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock.
**(c)** Notwithstanding subsections (a) and (b) of this section, after notice and a hearing, the court may—
(1) under principles of equitable subordination, subordinate for purposes of distribution all or part of an allowed claim to all or part of another allowed claim or all or part of an allowed interest to all or part of another allowed interest; or
(2) order that any lien securing such a subordinated claim be transferred to the estate.
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Federal law — U.S. Code and appendices · legal_authorities
Page 212
TITLE 11—BANKRUPTCY
§ 745
Editorial Notes
AMENDMENTS
1982—Pub. L. 97–222 inserted ‘‘but’’ after ‘‘relief,’’.
§ 745. Treatment of accounts
(a) Accounts held by the debtor for a par-
ticular customer in separate capacities shall be
treated as accounts of separate customers.
(b) If a stockbroker or a bank holds a cus-
tomer net equity claim against the debtor that
arose out of a transaction for a customer of such
stockbroker or bank, each such customer of
such stockbroker or bank shall be treated as a
separate customer of the debtor.
(c) Each trustee’s account specified as such on
the debtor’s books, and supported by a trust
deed filed with, and qualified as such by, the In-
ternal Revenue Service, and under the Internal
Revenue Code of 1986, shall be treated as a sepa-
rate customer account for each beneficiary
under such trustee account.
(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2613; Pub. L.
97–222, § 11, July 27, 1982, 96 Stat. 238; Pub. L.
98–353, title III, § 483, July 10, 1984, 98 Stat. 383;
Pub. L. 103–394, title V, § 501(d)(28), Oct. 22, 1994,
108 Stat. 4146.)
HISTORICAL AND REVISION NOTES
SENATE REPORT NO. 95–989
Section 745(a) indicates that each account held by a
customer in a separate capacity is to be considered a
separate account. This prevents the offset of accounts
held in different capacities.
Subsection (b) indicates that a bank or another
stockbroker that is a customer of a debtor is consid-
ered to hold its customers accounts in separate capac-
ities. Thus a bank or other stockbroker is not treated
as a mutual fund for purposes of bulk investment. This
protects unrelated customers of a bank or other stock-
holder from having their accounts offset.
Subsection (c) effects the same result with respect to
a trust so th
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