Question

CPA LAW Question

Mr. John Manville owed Mr. Paul Glennon $10,000. John transferred his car worth $10,000. to satisfy the debt. Two months later John filed bankruptcy as an individual under Chapter 7. His total non-exempt assets were about $20,000. and he owed debts of $90,000. John's trustee in bankruptcy demanded that Paul surrender the car. He refused saying he acted in good faith and that the car's value did not exceed the amount that he owed to Paul. a. Can Paul keep the car? Explain.
b. John's brother, James, also files bankruptcy. Among James' assets are the following: His residence valued at $500,000.00 with a mortgage of $490,000.00; a car with a value of $20,000.00 and a loan of $16,000.00 against it; a boat with a value of $30,000.00 with a loan of $5,000.00 against it. How will the Bankruptcy Court and Trustee deal with these assets? Explain your answer.

Answer 1

Answer a.

Mr. Poul is not liable to return the car as it transferred in the good faith 2 months before filing bankruptcy by Mr. John.

.

Answer b.

Bankruptcy court and trustee deals with assets by selling those assets after settlement of loans/mortgage on such assets.

Amount recovered from the assets

Assets	value of asset	loan or mortgage	Net amount
Residence Building	$500,000	$490,000	$10,000
Car	$20,000	$16,000	$4,000
Boat	$30,000	$5,000	$25,000
Total			$39,000

Feel free to ask your doubts.