Person B has been a rancher all her life. Her ranch is valued at $ 500,000. Person B has total 8 creditors and an indebtedness of $ 70,000. Among all the creditors two of the largest creditors are person O with a debt of $ 30,000 and person S with a debt of $ 25,000. The rest of the six creditors have a claim of less than $ 5,000. The drought has ruined all crops of person B. B cannot pay off her creditors. To find: The validity of a voluntary petition of the bankruptcy of person B with a $ 500,000 ranch.

Question

Omega, Inc., a publicly held corporation, has assets of $100 million and annual earnings in the range of $13 to $15 million. Omega owns three aluminum plants, which are profitable, and one plastics plant, which is losing $4 million a year. The plastics plant shows no sign of ever becoming profitable because of its very high operating costs, and there is no evidence that the plant and the underlying real estate will increase in value. Omega decides to sell the plastics plant. The only bidder for the plant is Gold, who intends to use the plant for a new purpose, to introduce automation, and to replace all current employees. Would it be ethical for Omega to turn down Gold’s bid and keep the plastics plant operating indefinitely for the purpose of preserving the employees’ jobs? Explain.

Answer 1

Question

Chapter 15, Problem 2BS

(a)

Summary Introduction

Case summary: Person B has been a rancher all her life. Her ranch is valued at $500,000. Person B has total 8 creditors and an indebtedness of $70,000. Among all the creditors two of the largest creditors are person O with a debt of $30,000 and person S with a debt of $25,000. The rest of the six creditors have a claim of less than $5,000. The drought has ruined all crops of person B. B cannot pay off her creditors.

To find: The validity of a voluntary petition of the bankruptcy of person B with a $500,000 ranch.

(b)

Summary Introduction

Case summary: Person B has been a rancher all her life. Her ranch is valued at $500,000. Person B has total 8 creditors and an indebtedness of $70,000. Among all the creditors two of the largest creditors are person O with a debt of $30,000 and person S with a debt of $25,000. The rest of the six creditors have a claim of less than $5,000. The drought has ruined all crops of person B. B cannot pay off her creditors.

To find: The validity of involuntary bankruptcy petition because of the force of person O or person S.

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