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Reggie files for Chapter 7 bankruptcy. Jim is appointed trustee and hires Debbie to represent him in the bankruptcy proceeding. Jim determines that there are

Reggie files for Chapter 7 bankruptcy. Jim is appointed trustee and hires Debbie to represent him in the bankruptcy proceeding. Jim determines that there are $15,000 of exempt assets and that Misty has a valid claim of $20,000 and a secured interest in a tractor which is worth $15,000. On February 1, Jim determines that there is $20,000 in the bankruptcy estate (excluding the exempt assets and the tractor). Jim is successful in setting aside a fraudulent transfer and also voiding a preference payment to Reggie's business partner. That produces another $15,000 which brings the total bankruptcy estate to $35,000 (excluding the exempt assets and the tractor). 4 months after filing the petition for bankruptcy, Reggie inherits $10,000 from his aunt who passes away suddenly. Jim's fees, Debbie's fees, the fees of accountants and court costs total $20,000. Reggie's wife Marcy has filed a proof of claim demonstrating that Reggie owes her $15,000 for child support. The only other valid claim is a $20,000 claim from the Dukem Inn, Inc. for Reggie's beer tab. How will the bankruptcy estate be distributed?

A.

Misty will get the tractor. Marcy will be paid $15,000. The trustee's fees, attorneys fees and court costs will be paid totaling $20,000 and the Dukem Inn, Inc. will be paid $10,000.

B.

Misty will get the tractor. Marcy will be paid $15,000. The trustee's fees, attorney fees and court costs will be paid totaling $20,000. The Dukem and Misty will receive nothing.

C.

The bankruptcy court will likely order that Debbie be paid all of the proceeds of the bankruptcy estate because lawyers are the subject matter of a lot of bad jokes and as such deserve extra compensation whenever possible.

D.

Misty will get the tractor. Marcy will be paid $15,000. The trustee's fees, attorney fees and court costs will be paid totaling $20,000. The Dukem will receive $8,000. Misty will receive $2,000.

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