What is the primary purpose of equitable subordination in bankruptcy proceedings?

The primary purpose of equitable subordination in bankruptcy proceedings is to prioritize payment of certain creditors over others. This legal concept allows a bankruptcy court to adjust the priority of claims based on principles of fairness. It often comes into play when a creditor's conduct raises questions about the fairness of their claim or treatment compared to other creditors. For example, if a creditor has engaged in misconduct, such as using their position to gain an unfair advantage or participating in fraud, the court may decide to subordinate that creditor’s claims, effectively lowering their priority in the payment hierarchy. This ensures that more deserving creditors—those who acted in good faith—receive payment first, maintaining a sense of fairness and equity among all stakeholders involved in the bankruptcy proceedings.

The other options do not accurately capture the essence of equitable subordination in this context, as it does not inherently increase the amount of debt available, expedite the process, or facilitate direct negotiations among creditors. Instead, it focuses on the prioritization and fair treatment of claims in the bankruptcy framework.