In re Image Worldwide, Limited
United States Court of Appeals for the Seventh Circuit
139 F.3d 574 (1998)
After his original company Image Marketing accumulated substantial debt, Richard Steinberg formed successor corporation Image Worldwide, which leased the same space from the same landlord (FCL) and used the same suppliers; Steinberg liquidated Image and used the proceeds for some creditors, but rather than demand payment from the liquidated Image, lender Parkway Bank required Worldwide to guarantee Image's remaining debt (and a further loan to pay off Image's debt to FCL) with a priority lien on Worldwide's own assets. Worldwide paid these guaranteed debts, became insolvent, and eventually failed; the bankruptcy trustee sought to recover the guarantees as fraudulent transfers, and the bankruptcy and district courts agreed Worldwide received no reasonably equivalent value.
Are inter-corporate guarantees constructive fraudulent transfers if the guarantor corporation only receives an indirect benefit that does not amount to reasonably equivalent value?