8.

The following fact pattern applies to the following two (2) questions. Debbie was on the edge of financial collapse. She realized that next week she would be filing for bankruptcy protection. Among her many unsecured creditors was Pete to whom she owed $2500. Debbie liked Pete and felt bad that he would almost certainly get nothing in her bankruptcy because he was an unsecured creditor. Debbie, as a result, granted Pete a security interest in a valuable painting she owned so that Pete would be treated as a secured creditor in the bankruptcy and, thus, would recover at least a portion of the monies he was owed. Debbie also owned a valuable violin which she did not want to lose to her creditors because of her financial troubles. Six months earlier (roughly six months before her bankruptcy petition), Debbie had transferred the violin to her neighbor Connie (with whom Debbie had no other business or financial relationship or dealings) with the understanding that Connie would hold it as a favor and then would transfer the violin back to Debbie after the bankruptcy. Question 8 (10 points) The transaction with Connie is an example of which of the following: preference fraudulent conveyance debtor in possession equal dignities rule