DCC 4119 Lecture Notes - Lecture 13: Personal Bankruptcy, Tax Credit, Insurable Interest

Apogee Widgets, Inc., has filed for Chapter 7 bankruptcy. Assets available to pay off creditors after liquidation totaled $2.1 million. Administrative costs associated with the bankruptcy proceedings amounted to $40,500; wages due to 400 employees were $1 million; unpaid expenses incurred after the bankruptcy filing but before appointment of the trustee were $20,500; property taxes past due were $195,000; and unsecured creditor claims were $1.5 million. In what order and what amount should the proceeds be distributed by the trustee?

A. $195,000 for property taxes, $40,500 for administrative expenses associated with the bankruptcy proceedings, $20,500 for unpaid expenses incurred after the filing of the bankruptcy petition but before appointment of the trustee, $800,000 wages due to employees, and $1,044,000 to unsecured creditors on a prorated basis

B. $40,500 for administrative expenses associated with the bankruptcy proceedings, $195,000 for property taxes, $20,500 for unpaid expenses incurred after the filing of the bankruptcy petition but before appointment of the trustee, $800,000 wages due to employees, and $1,044,000 to unsecured creditors on a prorated basis

C. $195,000 for property taxes, $40,500 for administrative expenses associated with the bankruptcy proceedings, $20,500 for unpaid expenses incurred after the filing of the bankruptcy petition but before appointment of the trustee, $1,000,000 wages due to employees, and $844,000 to unsecured creditors on a prorated basis

D. $40,500 for administrative expenses associated with the bankruptcy proceedings, $20,500 for unpaid expenses incurred after the filing of the bankruptcy petition but before appointment of the trustee, $195,000 for property taxes, $1,000,000 wages due to employees, and $844,000 to unsecured creditors on a prorated basis

Explain the advantages and disadvantages of a debtagreement approach to personal insolvency under Part IX ofthe Bankruptcy Act over the approach toinvoluntary bankruptcy under Part IV of theBankruptcy Act. In your answer explain, briefly, thedifferences between the two approaches.

Chapter 7 of the Bankruptcy Act is designed to do which of the following?