Asked by Marvelous Abraham on May 19, 2024
Verified
The Packer Video Company files for Chapter 7 bankruptcy. Its only non-exempt asset is a piece of equipment valued at $15,000. The claims that have been approved by the trustee are as follows:
(1) $2,500 in expenses of the trustee in the administration of the estate.
(2) $4,000 in wages, salaries, and commissions earned by employees within ninety days before the filing of the bankruptcy petition and the cessation of the business.
(3)
$500 in employment taxes owed to the state.
(4) Unsecured claims in the amount of $10,000.
(5) A perfected security interest in the amount of $2,000 which is held by First Bank and which is secured by the item of equipment.
How much money will be available to pay the general unsecured creditors who have no priority?
A) $15,000
B) $13,000
C) $10,500
D) $6,000
Non-exempt Asset
An asset that is not protected under bankruptcy laws and can be seized to satisfy creditor claims.
Perfected Security Interest
A legal state where a creditor has taken the necessary steps to establish and maintain a priority claim on a debtor's collateral in case of default.
General Unsecured Creditors
Creditors who have claims against a debtor without specific collateral backing those claims, ranking below secured creditors in priority for repayment.
- Acquire comprehension of the purposes and processes defined in different chapters of the Bankruptcy Act.
- Understand the differences between secured and unsecured claims in bankruptcy.
Verified Answer
CG
Crystal GuintoMay 25, 2024
Final Answer :
D
Explanation :
First, the expenses of the trustee ($2,500) and the employment taxes ($500) are paid because they are given priority. Then, the wages, salaries, and commissions ($4,000) are paid. The perfected security interest held by First Bank ($2,000) is also paid because it is a secured claim against the equipment. After these payments, $6,000 remains for the general unsecured creditors.
Learning Objectives
- Acquire comprehension of the purposes and processes defined in different chapters of the Bankruptcy Act.
- Understand the differences between secured and unsecured claims in bankruptcy.