Fact Pattern 21-1
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 21-1.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

Fact Pattern 21-1 
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 21-1.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

Quizplus · Accepted Answer

The payment to Music, Inc. can be recovered by the trustee as a voidable preference. This is because payment made to a creditor within 90 days prior to the filing of bankruptcy can be considered a preference if it gives the creditor more than they would have received in the normal course of business. As Jazz's creditors are only receiving 10 percent of their claims, any payment made to a creditor within 90 days prior to bankruptcy that is more than 10 percent of their claim can be recovered as a voidable preference.