Jake, a Businessman, Filed for Bankruptcy and Was Declared Insolvent

question 5

Multiple Choice

Jake, a businessman, filed for bankruptcy and was declared insolvent by the courts. He owed $15,000 each to two creditors and $5,000 each to two others. The courts also decreed that he should sell his house worth $30,000, to pay his debts. Which of the following is legally permissible in this scenario?

• A) Jake is entitled to sell his house and pay the creditors on a pro-rata basis.
• B) Jake is entitled to sell his house and pay whomsoever he chooses.
• C) Jake is entitled to sell his house and pay the creditors he owes the maximum amount of money to.
• D) Jake is entitled to sell his house and pay the creditors he owes the least amount of money to.

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Definitions:

Monetarists

Economists who emphasize the role of governments in controlling the amount of money in circulation as the primary method for stabilizing the economy and combating inflation.

Market System

An economic system where decisions regarding investment, production, and distribution are based on supply and demand.

Real Income

The income of an individual or group after adjusting for inflation, reflecting the actual purchasing power of the income.

Government Expenditures

Federal, state, and local government outlays for goods and services, including transfer payments.