Which of the following types of claims would be paid first in the distribution of a bankruptcy estate under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code if the petition was filed July 15, Year 3?
a.Federal tax lien filed June 30, Year 3.
b.A secured debt properly perfected on March 20, Year 3.
c.Employee wages due April 30, Year 3.
d.Inventory purchased and delivered August 1, Year 3.
Answer:B
Choice "B" is correct. All perfected security interests are paid first. Since the security interest here was filed more than 90 days before the bankruptcy, this event does not constitute a voidable preference.
Choice "d" is incorrect. The creditor is either an involuntary case gap creditor (third priority) or a creditor with a disallowed post-petition claim; the facts are unclear. In either case, a secured creditor would have priority.Choice "c" is incorrect. Wage claims for wages earned within 180 days of the bankruptcy have a fourth priority. Older wage claims are treated as general unsecured claims and are paid last. In either case, the wage claims are subordinate to a perfected security interest.
Choice "a" is incorrect. If the federal government obtains a lien for taxes against the debtor's estate before the bankruptcy petition is filed, the federal tax lien is treated as a secured interest. However, this interest is subordinate to the March 20 secured claim because the March 20 interest was perfected before the tax lien attached.
