Abe has an allowed claim of $5,000 against the estate of Deborah and has a security interest in her art collection in the amount of $3,000 of the $5,000 claim.

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Abe has a secured claim in the amount of $3,000 for his security interest in the art collection, and an unsecured claim in the amount of $2,000 for the remainder of his allowed claim against the estate. In a bankruptcy proceeding, secured creditors are paid first, and any remaining funds are distributed among unsecured creditors. Therefore, Abe would first be paid the $3,000 from the sale of the art collection, and then would receive a pro-rata share of any remaining funds from the estate up to his total allowed claim of $5,000. It would not be a voidable preference to pay Abe the full $5,000 as it is within his allowed claim against the estate.

Abe Has an Allowed Claim of $5,000 Against the Estate