Bob Goes Bankrupt

question 35

Multiple Choice

Bob goes bankrupt.He has several creditors and a small amount in savings.He owes XYZ Bank $200,000 for which he used his home as collateral.XYZ Bank properly perfected its interest in the home.Bob additionally owes $3,000 in alimony to an ex-wife,Sue; $50,000 in unsecured credit card bills; and $5,000 in unsecured debt to his friend Tina.After all exemptions are satisfied,$205,000 from the sale of the home and $5,000 in a small bank account remain for distribution to creditors.Which of the following is true regarding priority?

• A) All funds are added together and disbursed to the claimants based upon the percentage of each creditor's claim.
• B) Tina has first priority, the credit card companies are then paid, and XYZ Bank is entitled to any remainder.
• C) XYZ Bank receives $200,000 from the sale of the home, Sue receives $3,000, and the remainder is divided between the credit card companies and Tina.
• D) Tina has first priority, XYZ Bank is then paid, and the credit card companies divide the remainder.

---

Definitions:

Hourly Pay Rate

The compensation given for each hour of labor.

Average Rate

A value representing the middle point of a rate over a specified period, often calculated by summing rates and dividing by the number of rates.

Rate of Interest

The percentage of the loan amount charged for borrowing money, typically expressed as an annual rate.

Letter Grade

A system of evaluating academic performance using letters, such as A, B, C, D, and F, with A being the highest and F being failing.