Question

Sparkman Co. filed a bankruptcy petition and liquidated its noncash assets. Sparkman was paying forty cents on the dollar for unsecured claims. Bailey Co. held a mortgage of $150,000 on Sparkman’s land which was sold for $110,000. The total amount of payment that Bailey should have received is calculated to be

Answer 1

At least the 110,000

The deficiency will be based on jurisdictions and the state at which the bankruptcy occur.

Step-by-step explanation:

Baily will receive the 110,000 as the mortgage collateral was the real state. Once it was sold, Baley received the 110,000.

Sparkman offer is for unsecured claims, the mortage is secured, as the mortage is secured through mortgage origination.

Once Sparkman filed bankruptcy, the lender which is Bailey executed foreclosure to take ownership of the property and sell it to pay off the loan.

After foreclosure, Mailey has little to no resources for the remaining debt.

It will depend heavily on jurisdictions if Baily can force Sparkman to pay the 40,000 remaining.