Choice "A" is correct. A trustee in bankruptcy has the power to set aside preferences, which generally may be defined as a transfer that: (i) is made for the benefit of a creditor on account of an antecedent debt, (ii) is made within 90 days of the filing of the bankruptcy petition, (iii) is made while the debtor was insolvent (presumed within the 90-day period), and (iv) enables the creditor to get more than the creditor would have received in the bankruptcy proceeding. Here, the loan was made on April 1, creating a debt as of that date. The security interest was given on June 15. So, all four requirements are present, and the security interest can therefore be set aside by the trustee.Choice "d" is incorrect. A security interest can be taken in any of a debtor's property. There is no requirement that the goods covered be purchased with the funds borrowed. However, a security interest in such goods does have a special name: a purchase money security interest.
Choice "b" is incorrect. Although the security interest was perfected through filing before the bankruptcy petition was filed, the security interest nevertheless constitutes a preference because within 90 days of the filing of the bankruptcy petition the security interest was given on account of an antecedent debt and was made while the debtor was insolvent (presumed within the 90-day period).
Choice "c" is incorrect. There is no such exemption under preference law. The security interest constitutes a preference because within 90 days of the filing of the bankruptcy petition the security interest was given on account of an antecedent debt and was made while the debtor was insolvent (presumed within the 90-day period).