Indirect Preference

A preference resulting from a transfer by the debtor to one entity that results in a benefit to a second entity, thus rendering the second entity liable for a preference. An indirect preference occurs, for example, where a debtor pays a debt that is guaranteed; the payment, although not to the guarantor, reduces the guarantor’s exposure and thus is “for the benefit of” the guarantor.

Bankruptcy Code §§ 547(b)(1), 550(a)(1). See also Deprizio Doctrine, Preference.

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