The Packer Video Company files for Chapter 7 bankruptcy. Its only non-exempt asset is a piece of equipment valued at $15,000. The claims that have been approved by the trustee are as follows:
(1) $2,500 in expenses of the trustee in the administration of the estate.
(2) $4,000 in wages, salaries, and commissions earned by employees within ninety days before the filing of the bankruptcy petition and the cessation of the business.
(3)
$500 in employment taxes owed to the state.
(4) Unsecured claims in the amount of $10,000.
(5) A perfected security interest in the amount of $2,000 which is held by First Bank and which is secured by the item of equipment.
How much money will be available to pay the general unsecured creditors who have no priority?

Question

Quizplus · Accepted Answer

First, the expenses of the trustee ($2,500) and the employment taxes ($500) are paid because they are given priority. Then, the wages, salaries, and commissions ($4,000) are paid. The perfected security interest held by First Bank ($2,000) is also paid because it is a secured claim against the equipment. After these payments, $6,000 remains for the general unsecured creditors.

The Packer Video Company Files for Chapter 7 Bankruptcy