C is corrent. Bankruptcy law requires that the claims of secured creditors be satisfied before any unsecured claims are paid. Apex is a secured creditor in the amount of $25,000 (the liquidation value of the collateral). The remainder of Apex’s claim ($100,000 – $25,000 = $75,000) is an unsecured claim because it is not secured by any collateral. Unsecured claims are paid at the rate of 40 cents on the dollar. Therefore, Apex will receive a total of $55,000 on this note: $25,000 received in full as a secured creditor, and $30,000 received as an unsecured creditor ($75,000 × .40).
A is incorrect. Bankruptcy law requires that the claims of secured creditors be satisfied before any unsecured claims are paid. Apex is a secured creditor in the amount of $25,000 (the liquidation value of the collateral). The remainder of Apex’s claim ($100,000 – $25,000 = $75,000) is an unsecured claim because it is not secured by any collateral. Unsecured claims are paid at the rate of 40 cents on the dollar. Therefore, Apex will receive a total of $55,000 on this note: $25,000 received in full as a secured creditor, and $30,000 received as an unsecured creditor ($75,000 × .40).
A is incorrect. Bankruptcy law requires that the claims of secured creditors be satisfied before any unsecured claims are paid. Apex is a secured creditor in the amount of $25,000 (the liquidation value of the collateral). The remainder of Apex’s claim ($100,000 – $25,000 = $75,000) is an unsecured claim because it is not secured by any collateral. Unsecured claims are paid at the rate of 40 cents on the dollar. Therefore, Apex will receive a total of $55,000 on this note: $25,000 received in full as a secured creditor, and $30,000 received as an unsecured creditor ($75,000 × .40).
D is incorrect. Bankruptcy law requires that the claims of secured creditors be satisfied before any unsecured claims are paid. Apex is a secured creditor in the amount of $25,000 (the liquidation value of the collateral). The remainder of Apex’s claim ($100,000 – $25,000 = $75,000) is an unsecured claim because it is not secured by any collateral. Unsecured claims are paid at the rate of 40 cents on the dollar. Therefore, Apex will receive a total of $55,000 on this note: $25,000 received in full as a secured creditor, and $30,000 received as an unsecured creditor ($75,000 × .40).
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