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.

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Definitions:

Invitee

A person who is invited onto a property for the benefit of the property owner or occupier, leading to a higher duty of care.

Tort Reform

A legal process aiming to reduce litigation or damages that plaintiffs can receive, often in an effort to reduce frivolous lawsuits.

Cap Monetary Damages

The practice of setting a maximum limit on the amount of money that can be awarded to a plaintiff in a lawsuit for damages.

Civil Cases

Legal disputes between two or more parties wherein compensation or specific performance is sought rather than criminal sanctions.