Job Service, Inc., needs funds to meet its payroll, to make other current operating expenses, and to pay its creditors. Kelly, Job Service's only shareholder, loans the company $10,000 and accepts a promissory note signed on behalf of Job Service by Luna, the firm's accountant. Job Service's financial problems continue, however, and the firm's creditors file an involuntary petition to force it into bankruptcy. Is Kelly entitled to repayment of the loan to Job Service? If so, what is the priority of the claim?
What will be an ideal response?
Kelly is entitled to be repaid the amount loaned to Job Service. The priority is that of any other general creditor, however, which is at the bottom of the list of the classes of unsecured creditors. Because Luna signed the promissory note, Kelly can prove the claim. The claim is not superior or inferior to other claims because Kelly is the debtor's only shareholder, nor is it worthless for that same reason. Kelly is a not a secured creditor because she did not ask for, and did not get, collateral to secure the loan. Thus, she is a general unsecured creditor who can share, on a proportionate basis, whatever proceeds are available to other members of the class of general unsecured creditors after those with higher priority are paid in full.
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