[Lindrobe]

On February 28, Master, Inc. had total assets with a fair market value of $1,200,000 and total liabilities of $990,000. On January 15, Master made a monthly installment note payment to Acme Distributors Corp., a creditor holding a properly perfected security interest in equipment having a fair market value greater than the balance due on the note. On March 15, Master voluntarily filed a petition in bankruptcy under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code. One year later, the equipment was sold for less than the balance due on the note to Acme.

Master’s payment to Acme could

a. Be set aside as a preferential transfer because the fair market value of the collateral was greater than the installment note balance.

b. Be set aside as a preferential transfer unless Acme showed that Master was solvent on January 15.

c. Not be set aside as a preferential transfer because Acme was over secured.

d. Not be set aside as a preferential transfer if Acme showed that Master was solvent on March 15.

According to Wiley, the correct answer is C. To me it seems that the payment could be set aside as a preferential transfer precisely due to the fact that Acme was over secured. Could someone please explain to me?

FAR 12/3/14, 87
AUD 2/3/14, 90
BEC 4/1/14, 88
REG 5/27/14, 94

Licensed CPA, Indiana

"Successful people do things that unsuccessful people don't want to do"

[FUBARFAR]

Bump. Does anyone know the reason the answer to this question is correct?

FAR - 7/19/2016 - 83
BEC - 8/30/2016
AUD - TBD
REG - TBD

[Author]

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