Jessica sold goods to Stacy for $2,500 and retained a security
interest in them. Two months later, Stacy filed a voluntary petition in bankruptcy under Chapter 7. At this time, Stacy still
owed Jessica $2,000 for the purchase price of the goods, the
value of which was $1,500.
a. May the trustee invalidate Jessica’s security interest? If so,
under what provision?
b. If the security interest is invalidated, what is Jessica’s status
in the bankruptcy proceeding?
c. If the security interest is not invalidated, what is Jessica’s
status in the bankruptcy proceeding?