Deck 31: Bankruptcy Law

Question 1

Debts that remain after a liquidation are not discharged, and the debtor retains his or her obligation to pay them.

Answer 1

False

Question 2

One of the Bankruptcy Code's main goals is to ensure preferential treatment of certain creditors who are competing for a debtor's assets.

Answer 2

False

Question 3

Bankruptcy relief is provided under state, not federal, law.

Answer 3

False

Question 4

To qualify for a Chapter 7 bankruptcy, a debtor must complete a means test to determine whether the debtor has been living within his or her means.

Question 5

Each state permits a debtor in bankruptcy to retain the family home in order to preserve some equity to pay any debts that are discharged.

Question 6

Businesses must be technically insolvent to file for bankruptcy relief.

Question 7

In a Chapter 7 proceeding, at a meeting of creditors, one of the creditors is elected to take over the debtor's assets.

Question 8

If there is a presumption of abuse, the trustee must file a motion to dismiss a Chapter 7 petition or explain why such a motion would not be appropriate.

Question 9

If a debtor's income falls below the median income in the area in which the debtor lives, bankruptcy abuse will be presumed.

Question 10

In a Chapter 7 proceeding, the bankruptcy trustee collects the debtor's estate and reduces it to cash, preserving the interests of the debtor and creditors.

Question 11

Once a bankruptcy petition is properly filed, creditors can commence or continue most legal actions against the debtor to recover claims.

Question 12

The basic duty of a bankruptcy trustee in a Chapter 7 proceeding requires that the trustee be accountable for administering the debtor's estate.

Question 13

Anyone obligated to a creditor can declare bankruptcy.

Question 14

A debtor cannot defend against an involuntary bankruptcy petition because that would be contrary to the definition of involuntary .

Question 15

Because the purpose of a Chapter 7 proceeding is to provide a debtor with a fresh start, a discharge under Chapter 7 frees a debtor of all of his or her debts.

Question 16

All bankruptcy proceedings are conducted in federal bankruptcy courts.

Question 17

Any person -including individuals, but not partnerships or corporations-may be a debtor under Chapter 7.

Question 18

In a Chapter 7 proceeding if the value of the debtor's estate does not provide sufficient cash to pay all the creditors, it is given back to the debtor.

Question 19

In a Chapter 7 proceeding, unsecured creditors' claims are subordinate to the claims of secured creditors.

Question 20

A debtor who makes false statements under oath may be denied a discharge of his or her debts in the bankruptcy proceeding.

Question 21

In a Chapter 11 proceeding, a debtor corporation and its creditors agree on a plan under which the corporation pays a portion of its debt.

Question 22

With respect to creditors, the main goal of bankruptcy law is to

A)ensure that creditors will continue to lend to insolvent debtors.
B)protect creditor assets from diminution in value.
C)ensure equitable treatment in the competition for debtor assets.
D)make all debtor property available for all creditor claims.

Question 23

In a Chapter 11 proceeding, for an individual debtor , the court may order discharge at any time after the plan is confirmed.

Question 24

With respect to debtors, the main goal of bankruptcy law is to

A)encourage the continued use of credit.
B)ensure that third parties will continue to guarantee loans.
C)provide a new start without creditors' claims.
D)shield assets from creditors' claims.

Question 25

Chapter 7 of the Bankruptcy Code provides for

A)the adjustment of debts of individuals -not businesses.
B)liquidation proceedings.
C)the reorganization of the obligations of the debtor.
D)the adjustment of debts of businesses -not individuals.

Question 26

If all classes of creditors accept the debtor's Chapter 11 plan, the court cannot refuse to confirm it.

Question 27

Under Chapter 13, a plan may provide for the payment of all of the debtor's obligations in full.

Question 28

In a Chapter 7 proceeding, the primary effect of a discharge is to void any judgment on a discharged debt and to prohibit any action to collect it.

Question 29

Dana operates Energy Inc., a corporation in the fuel-supply business. Dana wants to create a plan under which the firm pays a portion of its debts, is discharged of the remainder, and is allowed to continue in business. Energy should file a petition in bankruptcy for relief through

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)an adjustment of debts.

Question 30

In a Chapter 13 bankruptcy, debtors retain most of their assets and agree to payments on their debts, most of which are discharged within three years.

Question 31

All bankruptcy proceedings are held in

A)federal bankruptcy courts.
B)state bankruptcy courts.
C)special cross-jurisdictional debtors courts.
D)local small-claims courts.

Question 32

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11, but not Chapter 13, bankruptcies.

Question 33

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

Question 34

Only the debtor may file a plan under Chapter 13.

Question 35

A court cannot dismiss a debtor's petition under Chapter 13 even if the circumstances indicate bad faith.

Question 36

Under Chapter 13, all debts are dischargeable.

Question 37

Under Chapter 13, a plan may provide for the payment of an amount less than 100 percent of the debtor's total obligations.

Question 38

In a Chapter 13 proceeding, the debtor retains possession of his or her assets.

Question 39

A Chapter 13 proceeding is more expensive and complicated than a Chapter 11 or Chapter 7 proceeding.

Question 40

In a Chapter 11 proceeding, the role of a debtor in possession is similar to that of a trustee in a Chapter 7 proceeding.

Question 41

A voluntary petition in bankruptcy must include

A)proof of each creditor's claim.
B)a list of the debtor's creditors and the amount of the debt owed to each.
C)all of the choices.
D)a statement indicating that the debtor understands basic economics.

Question 42

Under Chapter 7, to be entitled to receive a portion of a debtor's estate, each creditor must file a proof of claim with the bankruptcy court within ninety days of

A)the order for relief.
B)the petition.
C)the automatic stay.
D)the creditors' meeting.

Question 43

Under Chapter 7, once the proceeds have been distributed, the obligations of the debtor most likely to be discharged are

A)taxes accruing within the last three years.
B)claims based on the debtor's willful or malicious conduct or fraud.
C)none of the choices.
D)domestic-support obligations.

Question 44

Under Chapter 7, once the proceeds of the bankruptcy estate have been distributed, the debtor's remaining debts

A)are discharged.
B)paid by the court.
C)renewed without legal action as obligations of the debtor.
D)subject to legal actions to recover any unpaid amounts.

Question 45

Under Chapter 7, the primary effect of a discharge is to

A)extend the time for the debtor's payment of overdue debts.
B)allow a creditor to collect a previous judgment on a discharged debt.
C)force a creditor to obtain a new judgment on a discharged debt.
D)void a judgment on a discharged debt and prohibit an action to collect it.

Question 46

Under Chapter 7, a debtor who fails to appear at the creditors' meeting when required may be

A)denied a discharge of his or debts in the bankruptcy proceeding.
B)ordered to complete a means test.
C)forced to submit to an examination by the creditors.
D)told to turn over control of his or her property to a bankruptcy trustee.

Question 47

A bankruptcy trustee is accountable for

A)administering the debtor's estate.
B)exempting certain property from the bankruptcy.
C)operating a debtor's business to obtain maximum profit for the creditors.
D)commencing actions against the debtor to recover creditors' claims.

Question 48

An involuntary bankruptcy occurs when a debtor

A)files forms designated for the purpose.
B)is unable to pay his or her debts as they come due.
C)is forced into bankruptcy proceedings by his or her creditors.
D)has debts that exceed the fair market value of his or her assets.

Question 49

To force a debtor with twelve or more creditors into bankruptcy proceedings, at least three of those who join in the petition must have unsecured claims that add up to at least

A)$155.
B)$1,575.
C)$15,775.
D)$157,750.

Question 50

In addition to financial statements, each voluntary petition in bankruptcy must include

A)a plan outlining how debt payments will be made.
B)a certificate proving the receipt of credit counseling.
C)a creditors' agreement allowing the debtor to continue in business.
D)a statement of preference for one creditor over another.

Question 51

Gina's creditors attempt to force her into bankruptcy proceedings. The creditors will be unsuccessful if Gina

A)owns a business with ten or more employees.
B)is a farmer.
C)is also a creditor.
D)refuses to comply.

Question 52

Under Chapter 7, a discharge is most likely to be denied if the debtor

A)conceals property to hinder or delay a creditor.
B)destroys records of the debtor's financial condition.
C)fails to attend a required consumer education course.
D)all of the choices.

Question 53

Under any chapter of the Bankruptcy Code, failing to file the necessary documents with the debtor's petition for relief can result in

A)an automatic stay.
B)the discharge of the debtor's obligations.
C)the dismissal of the petition.
D)the distribution of the debtor's assets to his or her creditors.

Question 54

If a voluntary petition in bankruptcy is found to be proper, the court's entry of an order for relief

A)puts into place an automatic stay.
B)discharges the debtor's obligations.
C)dismisses the petition.
D)distributes the debtor's assets to his or her creditors.

Question 55

In a Chapter 7 bankruptcy, on a finding that the use of Chapter 7 would constitute substantial abuse, the court is most likely to

A)extend the time for the debtor's payment of overdue debts.
B)allow a creditor to collect a previous judgment on a disputed debt.
C)force a creditor to obtain a new judgment on a claimed debt.
D)dismiss the debtor's petition.

Question 56

Construction Inc. wants to agree with its creditors on a plan under which it pays a portion of its debt and is discharged of the rest. To accomplish this goal, the corporation should file a petition in bankruptcy under Chapter 11 for relief through

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)an adjustment plan.

Question 57

A bankruptcy trustee must determine whether the debtor's financial situation warrants relief based on a comparison of the debtor's income with

A)the profit of the debtor's creditors.
B)the income of other families in the same state.
C)the wealth available to the debtor's peers.
D)the debtor's expenses.

Question 58

Yang files a petition in bankruptcy under Chapter 7. Zhen takes control over her property and reduces it to money for distribution. Zhen is

A)a secured creditor.
B)a bankruptcy court judge.
C)a bankruptcy trustee.
D)a debtor who filed jointly for bankruptcy under a single petition.

Question 59

Under Chapter 7, creditors are paid in a certain order of priority. The highest-priority class comprises claims for

A)debts related to motor vehicles, household goods, and trade tools.
B)domestic support.
C)the debtor's equity in his or her residence.
D)student loans.

Question 60

Under the Bankruptcy Code, the means test is used to

A)keep higher-income people from abusing the bankruptcy process.
B)force more people to file for Chapter 7 bankruptcy.
C)determine the validity of a statement or claim by any party in interest.
D)prioritize the claims of the creditors in an involuntary proceeding.

Question 61

Compared to Chapter 7 and 11 plans, a Chapter 13 plan

A)permits creditors to force a debtor into involuntary bankruptcy.
B)allows a debtor to retain possession of his or her assets.
C)is more expensive and more complicated.
D)permits any interested party to file a repayment plan.

Question 62

eGear is a retail seller of phones, TVs, and other consumer electronic equipment. eGear sells Fiona a $2,400 television set on a retail installment security agreement on which she pays $100 down and agrees to pay the balance in equal installments. eGear retains a security interest in the set, and perfects that interest by filing a financing statement. Two months later, Fiona is in default on the payments to eGear and is involuntarily petitioned into bankruptcy by other creditors. Discuss eGear's right to repossess the TV set or to be paid on the debt.

Question 63

Baby Day Care, a sole proprietorship, wants to pay as many of its obligations as reasonably possible, and be discharged of the rest. To accomplish this goal, the proprietorship should file a petition in bankruptcy under Chapter 13 for relief through

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)an adjustment plan.

Question 64

Shippers Dispatch Company orders office equipment from Office Outfitters, Inc., which has an unperfected security interest in the equipment until it is paid for. Meanwhile, Shippers Dispatch takes out a loan from Capital Credit, Inc., subject to a security interest in Shippers Dispatch's building and equipment, which Capital perfects. Shippers Dispatch files a bankruptcy petition under Chapter 7. If the petition is granted, in what order will Shippers Dispatch's creditors be paid?

Question 65

At the time of the filing of the petition and the time of the filing of the plan, Chapter 13 imposes on the debtor the requirement of

A)goodwill.
B)good faith.
C)substantial means.
D)sufficient credit.

Question 66

Under Chapter 7 and Chapter 11

A)all of the choices.
B)petitions can be filed voluntarily or involuntarily.
C)the same principles govern the entry of the order for relief.
D)the automatic stay provision applies.

Question 67

Under Chapter 11, the debtor's obligations most likely to be discharged are

A)taxes accruing within the last three years.
B)claims based on the debtor's willful or malicious conduct or fraud.
C)none of the choices.
D)domestic-support obligations.

Question 68

Eligible for relief on a petition in bankruptcy under Chapter 11 is

A)any debtor who is eligible under Chapter 7, and railroads.
B)an individual, not a partnership or a corporation, with regular income and debts of less than a certain amount.
C)any "person" except railroads and certain financial institutions.
D)any party who is not eligible under a different chapter of the Code.

Question 69

Under Chapter 11, a plan to conserve and administer the debtor's assets must be submitted for acceptance and confirmation to

A)the creditors only.
B)the court only.
C)the creditors and the court.
D)the debtor only.

Question 70

Under Chapter 11, soon after the entry of the order for relief

A)any business debtor can choose to avoid creditors' committees.
B)the debtor's creditors file a plan to distribute the debtor's assets.
C)a creditors' committee of unsecured creditors is appointed.
D)the debtor's assets are liquidated to pay tax claims.

Question 71

Under Chapter 13, a repayment plan must provide for

A)the turnover of the debtor's future income to the creditors.
B)full payment of all claims, without exception.
C)the same treatment of each claim within a particular class of claim.
D)all of the choices.

Question 72

Under Chapter 13, after the completion of all payments under the plan, the court will grant a discharge of

A)only the debts provided for by the plan.
B)only the obligations not provided for by the plan.
C)all claims, whether or not provided for by the plan.
D)all obligations that remain unsatisfied.