Trigger Events and Requirements for Default-Rate Duties Highlighted by Recent Case

The concept of default-rate interest — interest that accrues on a debt at a higher-than-normal rate if the debtor defaults on terms of the underlying financial instrument — is well known. Default-rate duties, however, may be less recognized. Broadly, trust documents can impose additional duties on a trustee if certain conditions are triggered. A recent opinion from the U.S. Court of Appeals for the Tenth Circuit probed the requirements of one such triggering event.

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