Able Gets a Judgment Against Baker in State Court for $50,000

question 91

Multiple Choice

Able gets a judgment against Baker in state court for $50,000 on July 1. On July 15, Baker files a bankruptcy petition under Chapter 7. In this case:

• A) Able is a lien creditor.
• B) unsecured creditors will share proportionately with Able.
• C) the judgment is a preferential transfer that will be invalidated by the trustee.
• D) Both (a) and (b) are true.

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Definitions:

Unsecured Creditors

Creditors who have lent money without obtaining specific assets as collateral, meaning they have no special claim on the debtor's property if the debtor fails to pay.

Liabilities With Priority

Obligations that have a preferential claim over other types of debts in the event of a liquidation or bankruptcy.

Net Realizable Value

The estimated selling price of goods, minus the costs of their sale or disposal.

Unsecured Creditors

Creditors who have loaned money without any specific collateral, meaning they have a lower priority in case of the debtor's bankruptcy.