Bankruptcy Recharacterization

The 9th Circuit recently decided In re Fitness Holdings, Intern., Inc., 714 F.3d 1141.  The case stands for the conclusion that bankruptcy courts can recharacterize a claim from debt to an equity interest for purposes of the Bankruptcy Code Section 548.  This has important implications for possible fraudulent transfers and in turn determining a debt is non-dischargeable.  In reaching this conclusion the 9th Circuit joins the 3rd, 4th, 5th, 6th and 10th Circuits, as noted in the case itself.