Barrett,who Has Several Creditors and a Small Amount in Savings,goes

question 62

Multiple Choice

Barrett,who has several creditors and a small amount in savings,goes bankrupt.Barrett owes XYZ Bank $200,000 for which Barrett's home was used as collateral.XYZ Bank properly perfected its interest in the home.Barrett additionally owes $3,000 in alimony; $50,000 in unsecured credit card bills; and $5,000 in unsecured debt to a friend,Taliesin.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) Taliesin 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; the ex-spouse receives $3,000; and the remainder is divided between the credit card companies and Taliesin.
• D) Taliesin has first priority; XYZ Bank is then paid; and the credit card companies divide the remainder.

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