In March, Margaret made a loan to Pete for $10,000. Three months later, she began to hear rumors about Pete's failing financial condition. When in July, Pete asked her to loan him an additional $2,000 to buy inventory, Margaret required a security interest in the inventory and also demanded that Pete secure the first loan with his personal automobile. In September, Pete filed bankruptcy. Will these security interests stand up?

Question

Quizplus · Accepted Answer

The security interest in the automobile would be considered a voidable preference because it was for an antecedent debt and occurred within 90 days before the bankruptcy filing. The inventory loan, if properly filed, may stand as it was a new loan.

In March, Margaret Made a Loan to Pete for $10,000