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Let’s say the upgraded character normally has 10 health. It gets upgraded with Increased Durability, then gets 12 damage counters. If Increased Durability is scrapped, what happens?

Any time the game notices a character with a number of damage counters equal to or greater than its current health, the character is KO’d. So your character is KO’d. Sorry.
Source: Wizards of the Coast (2019-11-08)    【Link to Ruling】
Tags: Increased Durability