In re McDowell (Ch. 7 Case No. 98-54657, Adv. No. 99-05113)

Defendant made a loan to Debtor so that Debtor could pay a specific creditor. Debtor understood that loan could only be used to pay that creditor. Debtor sold certain real property and put the proceeds into the same bank account as Defendant's loan. Debtor paid the creditor and repaid the loan to Defendant within the ninety-day preference period. The Court held that the repayment to Defendant was not protected by the earmarking doctrine. The Court held that Debtor held Defendant's loan proceeds in an implied trust and that the trustee could not recover the repayment as a preferential transfer.

Thursday, February 8, 2001