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Subsequent New Value

Learn about the rule that a transfer may not be avoidable, even though it is a preference, if the creditor later provides new value to the debtor.


I. Elements of the Subsequent-New-Value Defense

No prebankruptcy transfer from the debtor to a creditor is avoidable as a preference to the extent that, after the transfer, the creditor gave new value to the debtor or for the debtor's benefit. We defined new value in another lesson. But for the subsequent-new-value defense to apply, two additional requirements must be met, namely:

·      the new value must not be secured by an otherwise unavoidable security interest,...