In re Denochick
United States District Court for the Western District of Pennsylvania
287 B.R. 632 (2003)
Denochick (debtor) took out a debt-consolidation loan from NBOC guaranteed by her sister Krasinski (creditor), and made loan payments directly to NBOC in the year before filing bankruptcy, payments that indirectly benefited Krasinski by reducing her exposure as guarantor even though the money itself went to NBOC, not to Krasinski. The bankruptcy trustee sought to avoid those payments as preferential transfers and recover the payment amounts from Krasinski herself, and the bankruptcy court ruled for the trustee, finding Krasinski was a creditor who benefited from the transfers and that no exception applied; Krasinski appealed.
Whether a bankruptcy trustee may recover preferential payment amounts of an avoided transfer from a guarantor who received the indirect benefit of the preferential payments.