Deck 38: Bankruptcy

Question 1

After reorganization, all debts are forgiven.

Answer 1

False

Question 2

An automatic stay will prevent a creditor from creating a lien against the debtor's property.

Answer 2

True

Question 3

Within each federal district court is established a bankruptcy court staffed by bankruptcy judges.

Answer 3

True

Question 4

In a Chapter 7 proceeding, an unsecured creditor who files a claim with the court after the deadline because he is too busy planning and going on a vacation would be totally unable to collect.

Question 5

The court will order the appointment of a trustee in a Chapter 11 proceeding only for cause or if the appointment is in the interests of creditors or equity security holders.

Question 6

Any debtors may seek relief under Chapter 7 of the Bankruptcy Code.

Question 7

Barb loaned Mark $500, which Mark agreed to repay on January 15, 2011. If Mark filed a voluntary petition of bankruptcy on August 1, 2010, Barb had a claim as a creditor.

Question 8

An assignment for the benefit of creditors requires the creditors' consent

Question 9

Chapter 5 involves liquidation, whereas Chapters 7, 11, 12, and 13 involve reorganization and adjustment of debts.

Question 10

A debtor may not file a plan at any time in a Chapter 11 reorganization.

Question 11

The court has the sole right to accept or reject a Chapter 11 plan of reorganization.

Question 12

Federal district courts may hear all matters collateral to the bankruptcy, even if these matters are not normally permitted to be brought in federal court.

Question 13

A fraudulent transfer made on or within two years prior to filing a petition for bankruptcy can be avoided by the trustee.

Question 14

The debtor alone decides upon the reorganization plan in Chapter 11 proceedings.

Question 15

The doctrine of subordination of claims might result in two unsecured creditors getting unequal proportions of their debts paid.

Question 16

For bankruptcy purposes, insolvency means that debts are greater than assets.

Question 17

A trustee in bankruptcy may sell the property of the debtor's estate.

Question 18

In a Chapter 13 proceeding, only the debtor may submit a plan of reorganization.

Question 19

Once a Chapter 13 plan of reorganization is confirmed, the provisions are binding on the debtor and all of his creditors.

Question 20

One creditor of a debtor may file a bankruptcy petition as long as the debtor owes him more than $5,000 in unsecured claims.

Question 21

While certain debts of an individual are not dischargeable under Chapters 7, 11, and 12, all debts are dischargeable under Chapter 13's "hardship discharge" provisions.

Question 22

A trustee under a Chapter 11 or 13 proceeding performs the same duties as a Chapter 7 trustee.

Question 23

Under exemptions in the Bankruptcy Code, a debtor may keep both $22,975 in equity in a residence and up to $3,675 in equity in a motor vehicle.

Question 24

A debtor has the option of using either federal or state exemptions; however, the 2005 Act imposes limits on the use of a state homestead exemption to the extent that the homestead was obtained through fraudulent conversion of nonexempt assets at any time before filing the bankruptcy petition.

Question 25

Donald has a $10,000 judgment against him for a debt owed to a creditor. If Donald files for bankruptcy and receives a discharge from the bankruptcy court, he will no longer be obligated to pay the judgment.

Question 26

A writ of execution is issued after a judgment against the debtor is entered in court.

Question 27

The estate of a debtor includes wages earned after commencement of a Chapter 7 liquidation proceeding.

Question 28

Garnishment is one form of pre-judgment remedy.

Question 29

A lien must be satisfied before the property is available to satisfy the claims of unsecured creditors.

Question 30

Garnishment cannot be ordered prior to a judgment's being entered.

Question 31

Chapter 12 of the Bankruptcy Code applies to individuals or couples engaged in farming if 50 percent of their gross income is from farming and aggregate debts do not exceed $1 million.

Question 32

A receiver is a disinterested person who collects and preserves the debtor's assets and income and disposes of them at the direction of the court which appointed the receiver.

Question 33

A debtor who files for bankruptcy can keep up to $1,550 in jewelry and all social security, veteran's, and disability
benefits under the exemptions found in the Bankruptcy Code.

Question 34

After secured creditors in a Chapter 7 liquidation proceeding have been satisfied and there is enough money left to pay some, but not all other creditors, the claims of the same rank share the money on a pro rata basis.

Question 35

In an assignment for the benefit of creditors, if each creditor is paid an equal share of his original obligation, the debtor is then discharged from any further obligation to the creditor.

Question 36

A composition of creditors is a bankruptcy form of relief under Chapter 13 of the Bankruptcy Code.

Question 37

In a Chapter 13 proceeding, the bankruptcy estate of an individual includes wages earned after commencement of the proceeding.

Question 38

Stephens, an employee of bankrupt ABC Company, would be able to receive her $2,000 in unpaid wages earned within 90 days before ABC's filing of the bankruptcy petition and $2,000 in contributions to her employee benefit plans, for a total of $4,000 before any money is paid to Ramsdell, a consumer, to compensate him for a deposit paid to the company for goods which were never delivered because of the company's going bankrupt.

Question 39

A composition would bind to the settlement all of debtor's creditors.

Question 40

Most student loans cannot be discharged under Chapter 13.

Question 41

The bankruptcy court may dismiss a:

A) Chapter 7 case, or in a case filed by an individual debtor whose debts are primarily consumer debts, may with or without the debtor's consent convert the case to a Chapter 11 or 13 case.
B) Chapter 7 case for cause after notice and a hearing.
C) Chapter 11 case for cause without notice and a hearing.
D) Chapter 13 case under no circumstances.

Question 42

A plan of reorganization under Chapter 13 will be confirmed when:

A) the debtor has not been discharged before.
B) the unsecured creditors are not discharged.
C) the unsecured creditors receive the same amount as the secured creditors.
D) the unsecured creditors receive at least as much as they would have if the debtor had liquidated.

Question 43

A debtor may not receive a discharge under Chapter 7 if he or she received a Chapter 13 discharge within the past six years in most cases.

Question 44

A Chapter 13 plan of reorganization may include all but which one of the following?

A) Priority debts must be paid in full unless the debtor waives that right.
B) The trustee must control future wages.
C) Assets must be liquidated.
D) The rights of secured and unsecured creditors may be modified.

Question 45

About half of all bankruptcy petitions are involuntary petitions.

Question 46

Bankruptcy under Chapter 13 differs from Chapter 11 in that:

A) an individual cannot use Chapter 11.
B) a corporation cannot use Chapter 13.
C) Chapter 11 cannot be instituted by involuntary petition.
D) Chapter 13 requires unsecured debts to be less than $100,000.

Question 47

All but which one of the following would be exempt from bankruptcy under the federal law?

A) $500 received in child support
B) A $300 cocktail ring
C) A $200 cashmere sweater
D) A $10,000 car

Question 48

An involuntary petition for bankruptcy can be filed with respect to a:

A) nonprofit charitable organization.
B) partnership that invests in real estate.
C) life insurance company.
D) wheat farmer.

Question 49

A statutory lien arises solely by force of statute and includes a security interest or judicial lien.

Question 50

Edith files a Chapter 7 petition in bankruptcy. She owns the following property: (1) an automobile valued at $1,000; (2) a homestead valued at $75,000, on which First Bank holds a mortgage of $50,000; (3) personal jewelry valued at $1,100; and (4) monthly disability payments of $1,000. Assuming Edith elects to use the exemptions listed in the
Bankruptcy Code, what property may Edith keep?

A) The disability payments only.
B) The disability payments and the homestead only.
C) The disability payments plus the automobile, at least part of the equity in the homestead, and the jewelry.
D) Nothing. She must sell all of her assets and have the proceeds distributed to the creditors, and she must turn the disability payments over to the trustee.

Question 51

A court will not grant a discharge under Chapter 7 to a debtor who:

A) has been granted a Chapter 7 discharge within eight years prior to filing.
B) has made false claims to the court.
C) has destroyed collateral.
D) is an individual.

Question 52

No private employer may terminate the employment of or discriminate with respect to employment against an individual solely because he is or has been a debtor under the Bankruptcy Code.

Question 53

Which of the following is both a prejudgment and a postjudgment remedy for a creditor?

A) Writ of execution
B) Garnishment
C) Attachment
D) Supplementary proceeding

Question 54

Kent loaned Barbara $8,000 and took back a note secured by Barbara's car. If Barbara files for bankruptcy when the value of the car is $4,500, what is Kent's status? He has:

A) a secured claim for $4,500.
B) an unsecured claim for $8,000.
C) an unsecured claim for $4,500.
D) a secured claim for $8,000.

Question 55

Which of the following debts would be discharged in bankruptcy?

A) A consumer credit loan for a stove
B) Property taxes on a beach house
C) Student loans
D) Alimony payments past due

Question 56

A court may confirm a Chapter 11 plan of reorganization that is not accepted by all classes of creditors if:

A) the court determines the plan does not discriminate unfairly and the plan is fair and equitable.
B) the plan does not provide for less than the amount the nonaccepting class bargained for.
C) the court determines that it is the only feasible plan, even if it is not accepted by any classes of claims.
D) the plan includes the creditors' rights in a logical manner.

Question 57

In March, Margaret made a loan to Pete for $10,000. Three months later, she began to hear rumors about Pete's failing financial condition. When in July, Pete asked her to loan him an additional $2,000 to buy inventory, Margaret required a security interest in the inventory and also demanded that Pete secure the first loan with his personal automobile. In September, Pete filed for bankruptcy. Will these security interests stand up?

A) Yes, if they are properly filed
B) Yes, since they are for antecedent debts
C) No, both will be voidable preferences
D) No, the security interest in the automobile would be a voidable preference

Question 58

Duties of a trustee in a case under Chapter 11 include all but which of the following?

A) To examine all proofs of claims
B) To provide the court with financial reports of the debtor's business operations
C) To investigate the financial condition of the debtor
D) To file a list of creditors

Question 59

All but which one of the following is a purpose of bankruptcy legislation?

A) To preserve existing business relations
B) To punish recalcitrant debtors
C) To fairly divide the assets among creditors
D) To allow rehabilitation of debtors

Question 60

Commencing a voluntary case by filing a petition constitutes an automatic order for relief.

Question 61

A trustee in bankruptcy may avoid which of the following?

A) Fraudulent transfers
B) Voidable preferences
C) Automatic stays
D) Both fraudulent transfers and voidable preferences

Question 62

Which of the following claims will be paid first from the debtor's estate in a Chapter 7 bankruptcy?

A) A gap creditor with a claim of $2,000
B) A state claiming $5,000 in back taxes
C) The trustee's expenses of $3,000
D) Employees claiming unpaid wages of $4,000 for wages earned within 120 days of the bankruptcy filing

Question 63

The debtor is presumed to have been insolvent on and during what period of time immediately preceding the date on which the petition was filed?

A) Thirty days
B) Sixty days
C) Ninety days
D) Six months

Question 64

All of the following are dischargeable in bankruptcy EXCEPT:

A) an unsecured note to a bank.
B) a car loan.
C) alimony and child support.
D) a court judgment against the debtor.

Question 65

Pre-judgment attachment permits a creditor to seize the debtor's property when the defendant:

A) cannot be served with a summons personally.
B) has not paid his debts on time.
C) has filed for bankruptcy.
D) was found guilty of usury.

Question 66

A plan for reorganization under Chapter 11 does not have to meet which of the following requirements to be confirmed by the court?

A) Good faith
B) Feasibility
C) No creditor approval
D) Cash payments

Question 67

The 1994 amendments to the Bankruptcy Code require that the U.S. Judicial Conference adjust for inflation the dollar amounts of certain provisions of the Code every:

A) three years.
B) five years.
C) six years.
D) eight years.

Question 68

Voidable preferences include all of the following EXCEPT:

A) a transfer of property of the debtor to or for the benefit of a creditor.
B) payment of taxes owed to a governmental unit.
C) a transfer of the debtor's property while the debtor was insolvent.
D) a transfer that enables a creditor to receive more than he would have received under Chapter 7.

Question 69

Able has an allowed claim of $5,000 against the estate of Wallace and has a security interest in his art collection in the amount of $3,000 of the $5,000 claim. Able:

A) will recover nothing in the bankruptcy proceeding.
B) will recover $5,000 in the bankruptcy proceeding.
C) has a secured claim in the amount of $3,000 and an unsecured claim in the amount of $2,000.
D) has a secured claim in the amount of $5,000.

Question 70

Non-bankruptcy compromises to give debtors relief while protecting the rights of creditors include all of the following except:

A) mergers.
B) nonstatutory assignments for the benefit of creditors.
C) receiverships under the direction of a court with equity powers.
D) compositions.

Question 71

Able gets a judgment against Baker in state court for $50,000 on July 1. On July 15, Baker files a bankruptcy petition under Chapter 7. Which of the following is true?

A) Able is a lien creditor.
B) A creditor with a security interest that was not perfected when the bankruptcy petition was filed has priority over Able.
C) The judgment is a preferential transfer that will be invalidated by the trustee.
D) Able will not be able to recover any of the judgment.

Question 72

Which of the following would be a voidable transfer if made within 90 days of bankruptcy?

A) An exchange for new value.
B) An enabling security interest perfected within 30 days after the debtor receives possession of the property.
C) A payment made in the ordinary course of business.
D) A payment made to or for the benefit of a creditor.

Question 73

Margaret has $3,200 cash after selling off her television, DVD player, and computer. She has debts of $4,800 owing to the following creditors: Anna $900
Bob's Shop $1,500
Hyatt's $2,100
Jones $300
If they all agree to a composition agreement, how much will Hyatt's be able to collect?

A) $2,100
B) $1,400
C) $700
D) $1,050

Question 74

Baker goes into bankruptcy owing $5,000 as wages to his employees. There is enough in his estate to pay all costs of administration and enough to pay his employees, but if the employees are paid, there will be nothing left for the general creditors. Which of the following is NOT true under the above facts?

A) The Bankruptcy Code provides for priority of wages owed to employees.
B) Secured creditors will be paid to the extent of their security interest before the employees will be paid.
C) The general creditors will not be paid.
D) The general creditors can be paid before the employees if they file a claim with the court.

Question 75

Confirmation of a plan for reorganization under Chapter 13 may be given only if:

A) the plan complies with applicable law and is given in good faith.
B) the plan provides for payments longer than three years.
C) the debtor remains in possession of the estate.
D) all of the creditors agree to accept it.

Question 76

One type of fraudulent transfer consists of the:

A) distribution of the debtor's property among creditors.
B) debtor's transferring of property with actual intent to hinder her creditors.
C) avoidance of statutory liens when debtor becomes insolvent.
D) discharge of debts of unsecured tardy creditors.

Question 77

An involuntary petition in bankruptcy:

A) eliminates the operation of an automatic stay.
B) may only be filed under Chapter 7 or 11.
C) must be filed by the trustee.
D) eliminates the need for the court to order a discharge.

Question 78

Once a Chapter 13 plan has been confirmed, it may:

A) be modified at the debtor's request but only if the trustee agrees.
B) be modified only if all unsecured creditors agree.
C) not be modified.
D) be modified at the debtor's request.

Question 79

Which chapter of the Bankruptcy Code allows for the adjustment of debts of an individual with regular income?

A) Chapter 7
B) Chapter 11
C) Chapter 12
D) Chapter 13

Question 80

An ordinary contract between the debtor and his creditors whereby the creditors receive pro rata a part of their claims and the debtor is discharged from the balance of the claims is:

A) a nonstatutory composition.
B) a statutory assignment.
C) an equity receivership.
D) an automatic stay.