Question

Which one of the following is most apt to protect an individual creditor's interests in a formal bankruptcy proceeding? Multiple Choice

The bankrupt firm's financial structure may be complicated with several groups and types of creditors.

The indirect costs of bankruptcy may result in lost revenues and poor maintenance.

The bankruptcy administrative costs may be high due to the length and complexity of the process.

The absolute priority rule can be violated.

The creditor may hold liens on specific assets.

Answer 1

if the individual creditor is holding lien on a specific asset, it will mean that the individual credit will have right to sell that a specific asset in the company and it will have a more secured claim on the company's asset in case of liquidation so it is most apt in order to protect the interest of individual creditor.

All the other statements are false

Correct answer will be (E) the creditor may hold liens on a specific asset.