b. $72,000 c. $74,000 d. $75,000 Explanation Choice "c" is correct. With respect to distributing assets from a bankruptcy estate, all secured claims are first paid; then priority claims are paid; and finally the remaining assets are split proportionally among the unsecured creditors who have timely filed a claim. Thus, Fracon Bank is entitled to the $70,000 secured by the mortgage, and Decoy is entitled to its $2,000 security interest first. The IRS has a priority claim for $12,000, which will be paid next. Only $20,000 remains to pay the unsecured debts which total $25,000 ($5,000 remaining on the Fracon Bank debt; $2,000 to JOG; $18,000 to Decoy; Nanstar does not share in the distribution because Nanstar failed to file a claim). The unsecured creditors will share in the remainder of the estate proportionally. So, in addition to the $70,000 from the sale of the mortgaged property, Fracon is entitled to $4,000, which is 5/25 ($5,000/$25,000) of the $20,000 remaining in the estate. The total Dart will receive is $74,000: $70,000 + $4,000. 8. A reorganization under Chapter 11 of the Federal Bankruptcy Code requires all of the following, except the: a. Liquidation of the debtor. b. The filing of a reorganization plan. c Confirmation of the reorganization plan by the court. d Opportunity for each class of claims to accept the reorganization plan. Explanation Choice "a" is correct. There is no requirement of liquidation in a reorganization. Choice "b" is incorrect. In a reorganization a plan of reorganization must be filed. Choice "c" is incorrect. In a reorganization the plan of reorganization must be approved by the court. Choice "d" is incorrect. In a reorganization each class of claimants has an opportunity to accept the plan (although it need not be accepted by all classes, such as unimpaired classes of security holders). 9. Jenny D's Salon was petitioned into bankruptcy involuntarily on August 2, Year 3 and received an order of relief on August 26, Year 3. The claims and expenses against Jenny D's Salon estate are as follows; Claims and expenses: $10,000 Fees earned by the bankruptcy trustee $4,000 Fees earned by the bankruptcy attorney $22,000 Claims by the unsecured general creditors $1,000 Claims by Skin Buff Inc., Jenny D's Salon skin care supplier for supplies ordered on August 10 and shipped August 15 $3,000 Claims by employee Linda for wages earned within 90 days of filing $2,000 Claims by employee Linda for benefits earned with 120 days of filing a. Bankruptcy Attorney b. Lisa c. Skin Buff, Inc d. The State e. Unsecured General Creditors