April 2021 Law 220 BCP CHP 5 BANKRUPTCY SAMPLE QUESTION with solution Besides being as on-air radio personality, Fraser runs a small business on the side called Crane's Wine Symposium. The business is doing well, but like lots of other small businesses it is having cash flow problems. Creditors are demanding payment and the bank refuses to lend the business any more money. The number of creditors is increasing and Fraser can see no way to pay them off. The next day, Fraser visited a bankruptcy office and made a voluntary assignment into bankruptcy. The trustee in bankruptcy realized the following amounts from the sale of the business assets: Asset: Creditors' Claims Building $300 000 First mortgage (building) $200 000 Storage shed 50 000 Second mortgage (building) 175 000 Car 50 000 Conditional sales agreement (shed) 30 000 Vintage wine 35 000 Chattel mortgage on car 30 000 Accounts receivable 10 000 Municipal taxes owing ($10,000/year) 30 000 Bank accounts 5 000 Rent owing ($5000/month) 25 000 Misc. equipment 15 000 Trade creditors 160 000 Trade fixtures 10 000 Antique register 5 000 Total Assets $480 000 Total Claims $650 000 The expenses of liquidation were $1500. The trustee's fee was $2000. 1. Show the order in which the trustee in bankruptcy made payments to the various types of creditors. Assume that all secured creditors had taken the necessary steps to protect their security