earmarking doctrine

Definition of "earmarking doctrine"
  1. A principle in bankruptcy law where a loan given to a debtor by a third party, intended specifically for paying off a certain creditor, is not susceptible to avoidance by the trustee for preference, given that the debtor did not really possess control over the funds and such a transaction does not reduce the debtor's estate
How to use "earmarking doctrine" in a sentence
  1. The bankruptcy court applied the earmarking doctrine to prevent the trustee from avoiding the third-party loan.
  2. Under the earmarking doctrine, the debtor was unable to control the funds as it was directly given to the specified creditor.
  3. The earmarking doctrine clarified that the debtor's estate was not lessened by the loan given by a third party.

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