Smith v. Creative Financial Management, Inc. (In re Virginia-Carolina Financial Corp.)

OPINION

NIEMEYER, Circuit Judge:

In this appeal we must decide whether the repayment by the debtors of a $200,000 loan, made under unique circumstances, is *195a voidable preference under the bankruptcy code, 11 U.S.C. § 547(b) (1988). Creative Financial Management, Inc., to whom $200,000 was paid by the debtors in bankruptcy, contends that the payment to it was not a preference because (1) it was not paid on account of a debt of the debtors but on the account of a third party’s debt, and (2) the loan was collateralized so that its repayment does not fall within the definition of a voidable…