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In this article, Associate Carl N. Wedoff explains how companies use engineered defaults and credit-default swaps (CDS) to their advantage. The International Swaps and Derivatives Association (ISDA) has yet to amend the underlying definitions of CDS contracts, and the legality of engineered defaults remains unclear. However, the authors advise management teams and investors to review their contracts and monitor the credit and CDS markets for any warning signs of engineered defaults that could damage their company. Mr. Wedoff wrote the article with Michael K. Ballew, Jr. of Bayview Asset Management LLC.