Divvying Proceeds Between Creditors in Bankruptcy

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Divvying Proceeds Between Creditors in Bankruptcy

Postby drmguy » Thu May 02, 2013 10:27 pm

I'm trying to figure out if my professor made a mistake because I don't know how she got the result in my notes.


Secured (unperfected)-$20,000

I have the secured creditor getting $6,000. The secured creditor losses a strong-arm challenge and is treated the same as the other creditors. Each creditor receives a pro-rata share of the 30,000. 20,000 is 1/5 of the total debt of 100,000. Therefore, the secured creditor gets 1/5 of 30,000.

The answer in my notes is that the secured creditor gets 30% of 30,000.

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Re: Divvying Proceeds Between Creditors in Bankruptcy

Postby JusticeHarlan » Fri May 03, 2013 9:33 am

Your analysis definitely sounds right to me.

Maybe there was some extra fact that you didn't write down, like the secured creditor was undersecured and part of the unsecured claims was a deficiency claim for the rest, and that claim plus the defeated secured claim gets him to 30%?

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Re: Divvying Proceeds Between Creditors in Bankruptcy

Postby Bronte » Sun May 05, 2013 11:30 pm

OP, you just made a transcription error in your notes: the secured creditor, like the unsecured creditors, gets a 30% recovery (i.e., 30 cents on the dollar), not 30% of the assets. You meant to write 30% of $20,000, which is $6,000.

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