What Would Be the Priority of the Claims as to the Distribution

question 3

Multiple Choice

What would be the priority of the claims as to the distribution of assets in a liquidation under Chapter 7 of the Bankruptcy Act? 1 is the highest claim, 5 is the lowest.
(1) Trustees' costs to administer and operate the firm.
(2) Common stockholders.
(3) General, or unsecured, creditors.
(4) Secured creditors, who have a claim to the proceeds from the sale of specific property pledged to secure a loan.
(5) Taxes due to federal and state governments.

• A) 5, 4, 1, 3, 2
• B) 4, 1, 5, 3, 2
• C) 5, 1, 4, 2, 3
• D) 1, 5, 4, 3, 2
• E) 1, 4, 3, 5, 2

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Definitions:

Obsessive-compulsive

Pertaining to a disorder characterized by recurrent, unwanted thoughts (obsessions) and repetitive behaviors (compulsions).

Histrionic Personality

A personality disorder characterized by a pattern of excessive emotionality and attention-seeking behavior.

DSM-5

The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, a manual published by the American Psychiatric Association that classifies and provides diagnostic criteria for mental disorders.

Schizophrenia

A chronic psychological disorder characterized by a disconnect among cognition, emotion, and behavior, resulting in distorted perceptions, improper feelings and actions, detachment from reality and interpersonal connections towards fantasy and illusion, accompanied by a feeling of psychic disintegration.