Q 03

Jessica sold goods to Stacy for $2500 and retained a security interest in them. Two months later, Stacy filed a voluntary petition in Bankruptcy under chapter 7. At this time, Stacy still owed Jessica $2000 for the purchase price of the goods, the value of which was $ 1500.

a) May the trustee invalidate Jessica's security interest? If so, under what provision?

b) If the security interest is invalidated, what is Jessica's status in the bankruptcy proceeding?

c) IF the Security interest is not invalidated, what is Jessica's status in bankruptcy proceeding?