In January,Jazz Dance Studio owes Katy,its musical director,$1,800 for cur?rent wages,receives $700 as a down payment for dance lessons from Lora,and pays a Music,Inc.,a sheet music supplier,$1,500 of $3,000 owed.In February,the studio files for bankruptcy under Chapter 7. Based on the size of the studio's estate in bank?ruptcy,each of Jazz's creditors will get only 10 percent of their claims.Regarding the payment to Music,Inc.,the trustee may

Question

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The trustee may recover the payment to Music, Inc. as a preference because it was made within 90 days before the bankruptcy filing and it gave Music, Inc. an advantage over the other creditors. The fact that Music, Inc. may have had priority does not prevent the trustee from clawing back the payment as a preference.

In January,Jazz Dance Studio Owes Katy,its Musical Director,$1,800 for Cur?rent