A firm is being liquidated several months after its Chapter 7 bankruptcy filing. The receiver has compiled the following information.
Assets $100,000
Common shares (at par) 22,000
Preferred shares (at par) 5,000
Secured bonds 50,000
Senior unsecured debt 27,000
Junior unsecured debt 18,000
Wage payable 7,000
Taxes owed 3,000
Credit from suppliers since filing 2,000
Court/trustee costs 1,500
Based on this information, what percentage of their claims will junior creditors receive?

Answer (A) is correct. Before the junior creditors are paid, secured bonds, court/trustee costs, credit from suppliers since filing, wages payable, taxes owed, and senior creditors must all be paid (in that order). After all of these debts are paid, the firm is left with $9,500 ($100,000 – $50,000 – $1,500 – $2,000 – $7,000 – $3,000 – $27,000) that the junior creditor is entitled to. The junior creditors will receive 53% of their claims ($9,500 ÷ $18,000). Please note that shareholders are last in line to the claims.