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

The equipment is sold for $15,000. First, the secured claim of $2,000 by First Bank is paid, leaving $13,000. Then, the trustee's expenses of $2,500 are paid, leaving $10,500. Next, the wages of $4,000 are paid, leaving $6,500. The employment taxes of $500 are paid next, leaving $6,000. This amount is available to pay the general unsecured creditors.

The Packer Video Company Files for Chapter 7 Bankruptcy