Under D argues lack of involvement in (mere swap transfer “earmarking”, b/w Cs)… whereas, under D induces swap via earmarking”, “inverse of collateral to guarantor transfer C MAY prevent via earmarking” negative pledge/ “inverse forbidding D from granting on assets to encumberance clause lien anyone other than C MAY range from forbidding Negative pledge/encumberance clause on specific asset of D’s to forbidding on any of D’s assets lien lien DEFENSES TO PREFERENCES may NOT to the extent that/insofar as (burden on § 547(c) trustee avoid transfer C, as per § 547(g))… is intended to be contemporaneous in fact § 547(c)(1) transfer –AND– substantially contemporaneous MAY be if for an (as per Transfer preferential antecedent debt § 547(b)(2))… BUT, if parties intended for then OK if debt is contemporaneous exchange, … slightly most courts will NOT extend beyond 10 days (though, antecedent MAY be shorter/longer depending on circumstances) Assume C makes unsecured loan to D, then discovers falsity in D’s credit report, which D remedies later that day by granting on D’s real property TD (to secure loan)… if D files for bankruptcy within 90 days, then IS TD NO defense preferential § 547(c)(1) YES in fact substantially contemporaneous… BUT, NOT intended to be contemporaneous (originally … unsecured, then amended after the fact) Existence of MAY poison defense NOT intended AAP clause § 547(c)(1) to be contemporaneous (even if acquiring of IS in fact substantially AAP contemporaneous) is payment of debt in § 547(c)(2) transfer ordinary course of business of intended to target Cs who pressure D in Avoidance preferential transfers exchange for special treatment, NOT Cs who are paid off in the same way that they had always been paid off 2 prongs (in addition to payment itself)… Debt incurred in the ordinary course of business of parties (i.e. D always buys product from C) –AND–
Under “earmarking”, D argues lack of involvement in transfer (mere swap b/w Cs)… whereas, under “inverse earmarking”, D induces swap via transfer of collateral to guarantor C MAY prevent “inverse earmarking” via negative pledge/ encumberance clause forbidding D from granting lien on assets to anyone other than C Negative pledge/encumberance clause MAY range from forbidding lien on specific asset of D’s to forbidding lien on any of D’s assets DEFENSES TO PREFERENCES § 547(c) trustee may NOT avoid transfer to the extent that/insofar as (burden on C, as per § 547(g))… § 547(c)(1) transfer is intended to be contemporaneous –AND– in fact substantially contemporaneous Transfer MAY be preferential if for an antecedent debt (as per § 547(b)(2))… … BUT, if parties intended for contemporaneous exchange, then OK if debt is slightly antecedent most courts will NOT extend beyond 10 days (though, MAY be shorter/longer depending on circumstances) Assume C makes unsecured loan to D, then discovers falsity in D’s credit report, which D remedies later that day by granting TD on D’s real property (to secure loan)… if D files for bankruptcy within 90 days, then TD IS preferential NO § 547(c)(1) defense YES in fact substantially contemporaneous… … BUT, NOT intended to be contemporaneous (originally unsecured, then amended after the fact) Existence of AAP clause MAY poison § 547(c)(1) defense NOT intended to be contemporaneous (even if acquiring of AAP IS in fact substantially contemporaneous) § 547(c)(2) transfer is payment of debt in ordinary course of business Avoidance of preferential transfers intended to target Cs who pressure D in exchange for special treatment, NOT Cs who are paid off in the same way that they had always been paid off 2 prongs (in addition to payment itself)… Debt incurred in the ordinary course of business of parties (i.e. D always buys product from C) –AND–