Which of the following describes a correct priority of claims in a bankruptcy liquidation?
A) Wages, government tax claims, consumer claims, and preferred stockholders.
B) Government tax claims, bankruptcy expenses, unsecured creditors, preferred stockholders.
C) Bankruptcy expenses, consumer claims, unsecured creditors, government tax claims.
D) Government tax claims, unsecured creditors, preferred stockholders, bankruptcy expenses.
E) Bankruptcy expenses, wages, unsecured creditors, preferred stockholders.

Question

Quizplus · Accepted Answer

In a bankruptcy liquidation, the priority of claims typically starts with bankruptcy expenses (such as legal and administrative fees), followed by specific priority claims like wages owed to employees, then unsecured creditors (which include consumer claims), and finally, shareholders, with preferred stockholders ahead of common stockholders. This order ensures that the costs of the bankruptcy process are covered first, then employees and other priority claims are paid, followed by general creditors, and if any assets remain, shareholders may receive something.

Which of the Following Describes a Correct Priority of Claims