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Corporate Finance

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Can the Bank Collect on Its Claims?

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CORPFN-W2YMD4

Marsha Doe's business owes \$2,000,000 to a bank. The business did not generate enough income to make the loan payments, and the loan is in default. The business property is worth \$1,000,000. Marsha's home is worth \$750,000, her cars are worth \$50,000, and she has \$200,000 in personal savings. Will the bank be able to collect on the full debt?

A

No. If the business is set up as a proprietorship, then the bank could take the business property but not Marsha's personal assets.

B

No. If the business is set up as an LLC, then the bank could take the business property but not Marsha's personal assets.

C

Yes. If the business is set up as a corporation, then the bank could take both the business property and Marsha's personal assets.

D

Yes. If the business is set up as an LLC, then the bank could take the business property and Marsha's personal assets.

E

No. If the business is set up as an LLC or corporation and Marsha declares personal bankruptcy to protect her personal assets.