Abc Co. Analysis

...

Dec 5

Once the printer has been sold by the bailiff at the current value of $18,000 the proceeds will be first used to pay the loan owning to Paul’s Printer because there was a Purchase Money Security Interest agreement signed between the two parties. Paul’s Printer is still owed $12,000 so therefor it would receive $12,000. The remaining funds will be used to pay the second secured creditor which is Royal Bank of Canada will receive the remaining $6,000. Since it is owed $8,000 it can also seize the printer and computer worth $2,000 and sell them to receive the remaining $2,000. Office Depot will not receive anything since it is not a secured creditor, it would only receive excess money after paying the secured creditors. But Office Depot still has an available remedy to sue for its $2,000.

In the case of bankruptcy the Trustee in Bankruptcy will have possession of the assets, which it will to satisfy the debts of the debtor. If the printer was sold for its current value of $18,000 then the funds will be distributed in the following way. The government would want to be paid its taxes owed first since it would realise the debtor may not be able to pay taxes as they become due, therefor the government would be the first to receive its money of $1,000 in taxes. Paul’s Printer would receive priority on the printer since it’s a secured creditor with a Purchase Money Security Interest agreement, therefore it would receive $12,000 it is owed. Then the second secured creditor is Royal Bank of Canada which is owed $8,000, it is a secured creditor because it as General Security Agreement and a All Present and After Acquired Property agreement. It would receive the remaining $5,000 and it can also sell the office printer and computer worth $2,000 to receive its remaining funds. For any amounts remaining it will be allowed to sue the debtor but it is recommend not to since it would be extremely costly to sue for $1,000 that it is owed. Office Depot will not receive anything because no funds remain and it is not a secure creditor, but it can sue the debtor if it chooses to. Although it is not recommended suing for $2,000 as it will be very costly and the benefit will be outweighed by the benefit.