What type of claim would a salesperson's commission be considered when a real estate brokerage declares Chapter 7 bankruptcy?

What type of claim would a salesperson's commission be considered when a real estate brokerage declares Chapter 7 bankruptcy?

• A. Priority claim
• B. Secured creditor claim
• C. Unsecured creditor claim
• D. Employee's wage claim

Answer: (C)

A salesperson's commission would be considered an unsecured creditor claim when a real estate brokerage declares Chapter 7 bankruptcy. This classification arises because commissions owed to salespersons are not backed by any specific collateral. In bankruptcy cases, unsecured claims are those where the creditor does not have a lien or legal right to specific property to secure the debt. In the context of real estate sales, the commission is typically based on a contractual arrangement for services rendered rather than a claim to an asset held by the brokerage. As such, when bankruptcy proceedings occur, these commissions fall into a category where they are treated as general debts, ranking behind secured claims and other priority claims during asset distribution. Understanding the hierarchy in bankruptcy is crucial, particularly for those in real estate, as it affects how and when claims will be satisfied. While employee wage claims may take precedence over other unsecured claims, commissions are generally not classified as wages but rather as compensation for services, which further solidifies their place as unsecured claims in bankruptcy situations.

A salesperson's commission would be considered an unsecured creditor claim when a real estate brokerage declares Chapter 7 bankruptcy. This classification arises because commissions owed to salespersons are not backed by any specific collateral. In bankruptcy cases, unsecured claims are those where the creditor does not have a lien or legal right to specific property to secure the debt.

In the context of real estate sales, the commission is typically based on a contractual arrangement for services rendered rather than a claim to an asset held by the brokerage. As such, when bankruptcy proceedings occur, these commissions fall into a category where they are treated as general debts, ranking behind secured claims and other priority claims during asset distribution.

Understanding the hierarchy in bankruptcy is crucial, particularly for those in real estate, as it affects how and when claims will be satisfied. While employee wage claims may take precedence over other unsecured claims, commissions are generally not classified as wages but rather as compensation for services, which further solidifies their place as unsecured claims in bankruptcy situations.