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 for bankruptcy.Will these security interests stand up?

Question

Quizplus · Accepted Answer

The security interest in the automobile would be a voidable preference because it was given for an antecedent debt within 90 days before the bankruptcy filing, which can be avoided by the bankruptcy trustee.

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