Careful Crafting Of Guarantee Can Allow Claim Revival

Law360, New York (January 31, 2008, 12:00 AM EST) -- Creditors often compromise disputed claims against debtors and their guarantors. In connection with the settlement of claims against a debtor and its guarantor, the creditor may give the debtor and the guarantor written releases from further liability in exchange for a settlement payment.

But what if the creditor later surrenders a portion of the payment in settlement of a preference recovery action? Can the creditor revive the guarantee notwithstanding the release?

In a recent opinion,[1] the United States Bankruptcy Appellate Panel of the Ninth Circuit held...
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