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Earmarking Doctrine

earmarking doctrine n

[probably so called because the loan has been earmarked, i.e., specifically designated, by the debtor to pay a specific creditor]
: a doctrine in bankruptcy law: a loan made by a third person to a debtor to enable the debtor to pay off a specified creditor cannot be avoided by the trustee as a preference since the debtor never actually had control of the funds and the transfer does not diminish the debtor's estate


Source: Merriam-Webster's Dictionary of Law ©1996. Merriam-Webster, Incorporated. Published under license with Merriam-Webster, Incorporated.