Question

In January, Jazz Dance Studio owes Kay, its musical director, $1,800 for current wages, receives $700 as a down payment for dance lessons from Lora, and pays a Music, Inc., a sheet music supplier, $1,500 of $3,000 owed. In February, the studio files for bankruptcy under Chapter 7. Based on the size of the studio's estate in bankruptcy, each of Jazz's creditors will get only 10 percent of their claims. Regarding the payment to Music, Inc., the trustee maya. not recover it because Music's claim has priority.b. not recover it unless Music is an insider.c. recover it as a fraudulent transfer.d. recover it as a voidable preference.

Answer 1

d. recover it as a voidable preference.

Step-by-step explanation:

Every creditor has the right to recover the amount from its debtor.

Basically Music Inc. has the right to recover from Jazz Dance Studio, as in the books of Jazz Dance Studio, Music Inc. is a creditor amounting $1,500.

Although Dance Studio has filed for bankruptcy, it is still liable for any payment to be made towards it creditors, outstanding.

Therefore, even after such bankruptcy Music Inc. can recover its amount from Dance Studio, even before filling for bankruptcy, as that amount can be set aside by the liquidating firm.