Bob Goes Bankrupt

Bob goes bankrupt.He has several creditors and a small amount in savings.He owes XYZ Bank $200,000 for which he used his home as collateral.XYZ Bank properly perfected its interest in the home.Bob additionally owes $3,000 in alimony to an ex-wife,Sue; $50,000 in unsecured credit card bills; and $5,000 in unsecured debt to his friend Tina.After all exemptions are satisfied,$205,000 from the sale of the home and $5,000 in a small bank account remain for distribution to creditors.Which of the following is true regarding priority?

A) All funds are added together and disbursed to the claimants based upon the percentage of each creditor's claim.
B) Tina has first priority, the credit card companies are then paid, and XYZ Bank is entitled to any remainder.
C) XYZ Bank receives $200,000 from the sale of the home, Sue receives $3,000, and the remainder is divided between the credit card companies and Tina.
D) Tina has first priority, XYZ Bank is then paid, and the credit card companies divide the remainder.

Correct Answer:

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