Question

Bill's house is sold for $120,000 to satisfy several liens. Priority 1 lienholder, Abe, is owed $60,000; Priority 2 lienholder, Ben, is owed $90,000, and Priority 3 lienholder, Carla, is owed $30,000. How will the proceeds from the sale be divided?

A. Abe = $60,000 : Ben = $60,000, Carla = $0
B. Abe = $60,000; Ben = $40,000; Carla = $20,000
C. Abe = $40,000 : Ben = $60,000; Carla = $20,000
D. Abe = $45,000 : Ben = $45,000; Carla = $30,000

Answer 1

The proceeds from the sale of Bill's house will be divided by paying off the lienholders in the order of their priorities. Abe will receive $60,000, Ben will receive the remaining $60,000, and Carla will receive nothing.

Step-by-step explanation:

When Bill's house is sold for $120,000 to satisfy several liens, the proceeds from the sale must be divided according to the priority of the lienholders and the amounts they are owed. The lien with priority 1 will be paid first, followed by the second priority lien, and so on until the proceeds are exhausted.

Here's how the proceeds will be divided:

• Abe (Priority 1 lienholder) is owed $60,000. He will be paid in full because his lien has the highest priority.
• Ben (Priority 2 lienholder) is owed $90,000. After paying Abe, there will be $60,000 left ($120,000 - $60,000), so Ben will receive the remainder.
• Carla (Priority 3 lienholder) is owed $30,000. Unfortunately, there will be no funds remaining after paying Abe and Ben, so Carla will receive nothing.

Therefore, the proceeds will be divided as follows: Abe = $60,000; Ben = $60,000; Carla = $0. The correct answer is option A.