In the case of In re Computer World Solution Inc., the U.S. Bankruptcy Court for the Northern District of Illinois held that loan payments by a debtor constituted avoidable preferential transfers. At trial, the lender argued that the earmarking doctrine applied to the payment it had received, that these payments were in the ordinary course of business according to ordinary business terms, and that the lender’s forbearance constituted new value to the debtor.
These theories were all dismissed by the court, which found in favor of the debtor and entered judgment against the lender for $1.5 million.
The Facts
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