Question

Assume that Kay (from previous example) filed for personal bankruptcy in 2013 and that the debt is a business debt. At that time, Ross learned that unsecured creditors (including Ross) were ultimately expected to receive 20 cents on the dollar. In 2014, settlement is made, and Ross receives only $150. How much should be deducted?

Answer 1

To determine the deduction, the original amount of the debt must be known. The amount Ross received from the settlement is insufficient information for a precise calculation without knowing the initial debt amount.

Step-by-step explanation:

The student has asked about the amount that should be deducted given that Ross, an unsecured creditor, received only $150 from a bankruptcy settlement, when it was expected that unsecured creditors would receive 20 cents on the dollar. In this scenario, we need to determine the original debt amount that corresponds to the settlement received by Ross to calculate the amount that should be deducted, presumably from Ross's financial accounting or tax statements.

We can find the original amount of the debt by taking the amount received ($150) and dividing it by the expected payout percentage (20%). However, the question does not provide enough information to determine the original debt before the settlement. The student needs to provide the initial amount of the debt in order to calculate the deduction accurately.