Ashitaka has declared bankruptcy and his trustee is currently dividing his assets.Ashitaka has three creditors.The first, a bank, has security on a loan for $30 000.The second is his friend, who is owed $6000.The third is the government, which is owed $5000 in taxes.Ashitaka has only one relevant asset, a painting, with fair market value of $33 000. That painting is subject to the bank's security.Which of the following statements is most likely to be TRUE?

Question

Quizplus · Accepted Answer

The bank has a secured claim on the painting valued at $33,000, so it will be paid first up to the value of its security, which is $30,000. The remaining $3,000 would then be distributed to the next priority creditor, which in many jurisdictions is the government for taxes owed, leaving nothing for the unsecured creditor, Ashitaka's friend.

Ashitaka Has Declared Bankruptcy and His Trustee Is Currently Dividing