Although many business transactions involve debt secured by collateral, its important to realize that in some cases creditors are faced with collecting debts that are unsecured as well. Knowing what rights creditors have against third parties who provide payment assurances on behalf of the debtor will allow aid in making claims against the debtor.

Read the case below and answer the questions that follow.

Yankee Export Company (YEC) is a purveyor of U.S. products for several European food market chains. YECs annual revenue is approximately $10 million, and the company employs approximately 20 people, including YECs only shareholders, directors, and officers: Moss and Whippany. Moss is the day-to-day manager of the venture, while Whippany is mostly an investor with no management duties other than giving consultation on business matters when asked by Moss. For several years, the venture was profitable, but due to a rapid increase in the value of the U.S. dollar against European currencies, YEC began to have cash flow problems. Its products were becoming more expensive for its European customers, and orders slowly dropped over a period of a year. When it appeared that YEC would be unable to generate enough cash to cover monthly expenses, Moss called for a meeting with Whippany and with YECs accountants. The parties agreed that the rise of the dollar had a negative impact on all U.S. exports and that YEC was at the beginning of a financial challenge. The companys assets were approximately $200,000. Moss and Whippany decide to file for bankruptcy protection.

Once YEC files its bankruptcy petition, which of the following is correct?

• Creditors are given the power to attempt to collect YECs debts because of the automatic stay.

• Creditors are legally prohibited from attempting to collect YECs debt because of the automatic stay.

• Creditors are legally prohibited from attempting to collect YECs debt because of the cram-down provision.

• Creditors are given the power to attempt to collect YECs debts because of voidable transfers.

• Creditors are given the power to attempt to collect YECs debts because of the cram-down provision.