In January, Jazz Dance Studio owes Kay, 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.
-Refer to Fact Pattern 26-2.Based on the size of the studio's estate in bankruptcy,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 made to Music, Inc. as a voidable preference because it was made within 90 days of the bankruptcy filing and gave Music, Inc. an advantage over other creditors. Since all creditors are only receiving 10 percent of their claims, the trustee may seek to recover any preferential payments made to creditors within the 90-day period.

In January, Jazz Dance Studio Owes Kay, Its Musical Director