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.The highest priority belongs to

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.The highest priority belongs to

Quizplus · Accepted Answer

In a Chapter 7 bankruptcy, creditors are paid out in a specific priority order. Secured creditors who have collateral for their loans are paid first, followed by priority unsecured creditors, such as tax debts, and then general unsecured creditors. In this case, neither Kay nor Music, Inc. are secured creditors, so they would fall under the priority unsecured creditors category. As such, they would be paid before general unsecured creditors like Lora. However, as they are both priority unsecured creditors, they would have equal priority and would be paid in proportion to the amount of debt owed to them. Therefore, the highest priority belongs to both Kay and Music, Inc.