Deck 15: Creditor Debtor Relations and Bankruptcy

Question 1

Recording a mortgage perfects the lender's security interest in the mortgaged property.

Answer 1

True

Question 2

A farmer cannot be forced into involuntary bankruptcy.

Answer 2

True

Question 3

A short sale is a sale of only part of the whole property subject to a mortgage.

Answer 3

False

Question 4

A creditor must exhaust all legal remedies against the principal debtor before holding a surety responsible for payment.

Question 5

A creditor can demand payment from the surety before the debt is due.

Question 6

The clerk of a bankruptcy court must provide consumer-debtors with information on the types of services available from credit counseling agencies.

Question 7

Any "person"-defined as including corporations-may be a debtor in a liquidation proceeding.

Question 8

In a few states,statutes allow the homestead exemption only if the judgment debtor has a family.

Question 9

An order for relief in a bankruptcy proceeding amounts to a discharge of the debts of the party petitioning for bankruptcy protection.

Question 10

A debtor must be insolvent to file for bankruptcy relief.

Question 11

Bankruptcy proceedings are held in state courts.

Question 12

The filing of a petition for bankruptcy will automatically stay most legal actions against the debtor.

Question 13

A defaulting debtor cannot redeem nonexempt property before a sale under a writ of execution.

Question 14

Before filing for bankruptcy,a consumer-debtor must receive credit counseling.

Question 15

A creditor cannot take any amount from a debtor's weekly take-home pay through garnishment.

Question 16

To supply false information on official bankruptcy schedules is a crime.

Question 17

An artisan's lien is effective only if a creditor has possession of the property.

Question 18

To use attachment as a remedy,a creditor must have an enforceable right to payment of the debt.

Question 19

If a debtor's income is below the median income,there is no presumption of bankruptcy abuse.

Question 20

A debtor's vehicle is never exempt from satisfaction of a judgment debt.

Question 21

Payments under a Chapter 13 plan must be completed within three to five years,depending on the debtor's family income.

Question 22

A repayment plan case can be initiated by the conversion of a liquidation petition.

Question 23

Once a discharge is granted,it may not be revoked,even if,for example,a debtor concealed property to defraud a creditor.

Question 24

In the majority of states,debtors may use only federal,not state,exemptions to exempt certain property from the bankruptcy.

Question 25

A bankruptcy trustee has the power to avoid preferences.

Question 26

A preference occurs when a debtor transfers property or money favoring one creditor over others.

Question 27

Jessie's debt to Kayla is past due.Kayla brings a legal action against Jessie to collect the debt.Kayla asks the court to order Liberty Bank,in which Jessie has an account,to pay a portion of the funds to Kayla.This is a request for​

A)a writ of execution.
B)an order of garnishment.
C)an order that would violate most state laws.
D)a composition agreement.

Question 28

Julie owes Ryan $10,000.When the debt comes due,Julie refuses to pay.Ryan obtains a judgment to collect the debt.Using a writ of execution,the court orders the sheriff to seize Julie's boat and sell it to pay the debt.The boat sells for $15,000.Ryan will receive​

A)$15,000.
B)$10,000.
C)$7,500.
D)$15,000 minus the collection costs.

Question 29

Edgar refuses to pay Delia $500 for the cost to repair Edgar's washing machine and dryer,which Delia still possesses.Delia has a lien on the machines,which will terminate​

A)if she continues to maintain possession.
B)if she does not file a written notice of lien within thirty days.
C)if she voluntarily surrenders possession.
D)at the end of the machines' warranty period.

Question 30

A student loan is discharged under Chapter 13 unless the creditor can show "undue hardship."​

Question 31

Some student loans are dischargeable in a Chapter 7 bankruptcy.

Question 32

Unsecured creditors do not have a vote to confirm a Chapter 13 plan.

Question 33

A workout-a privately negotiated adjustment of creditor-debtor relations-is more expensive and takes longer than a reorganization proceeding.

Question 34

In a repayment plan case,the plan must provide for payment of all claims in full,whether or not they are entitled to priority.

Question 35

Olive borrows money from Capital Loan Company.For Capital to obtain a writ of execution,Olive must​

A)be unable or refuse to pay the amount of a judgment.
B)be unable to redeem her exempt property.
C)be notified in writing (in a "writ")of the lender's intent.
D)surrender possession of her property to a court.

Question 36

Frank performs a contract with Gene to add a garage to Gene's property,but Gene does not pay.Frank can file a lien on Gene's property if,from the last date labor or materials were provided,he acts​

A)immediately.
B)within 60 to 120 days.
C)within two years.
D)within a reasonable time.

Question 37

A bankruptcy trustee has the power to avoid a sale of the debtor's property.

Question 38

The same principles that govern the filing of a liquidation petition apply to reorganization proceedings.

Question 39

All debts are dischargeable in bankruptcy.

Question 40

The basic duty of a bankruptcy trustee is to collect the debtor's property and reduce it to money for distribution.

Question 41

Daniel is a trustee for a federal bankruptcy court.Daniel's duties include​

A)collecting the debtor's available estate.
B)establishing priority for the payment of unsecured creditors.
C)operating a debtor's business to obtain maximum profit for creditors.
D)submitting to an examination under oath by the creditors.

Question 42

Dan defaults on a debt to Rachel.Rachel will not be able to recover the debt from​

A)the sale of Dan's prize-winning pet dog.
B)the sale of Dan's investments in stocks.
C)Dan's wages.
D)Dan's lottery winnings.

Question 43

Creditors hold judgments on overdue debts against Expert Auto Repair when the debtor receives a discharge in bankruptcy.The discharge will​

A)extend the time for payment of the overdue debts.
B)have no effect on the creditors' judgments.
C)require creditors to re-file their collection actions.
D)void any creditor's judgment on a discharged debt.

Question 44

Renee's voluntary petition for bankruptcy is found to be proper.The order for relief is effective as soon as​

A)she files the petition.
B)she posts a bond to cover the costs of the proceedings.
C)her creditors agree to the terms.
D)the trustee collects and distributes the property of her estate.

Question 45

Cassie files a voluntary petition in bankruptcy for relief through a liquidation proceeding.Among her debts that will not be discharged are claims​

A)by creditors who were not notified of the bankruptcy.
B)for money to be paid for goods not delivered.
C)for contributions to employee benefit plans.
D)for long overdue credit-card debt.

Question 46

Troy files a petition for bankruptcy.Troy must include with the petition​

A)proof of each creditor's claim.
B)a list of creditors and the amount of the debt owed to each.
C)all of his debit and credit cards to be disposed of by the court.
D)an affidavit testifying to his having studied the Bankruptcy Code.

Question 47

EZ Credit,Inc. ,lends $1,000 to Joe. Kay acts as Joe's surety. If Kay pays the loan,she gets​

A)any right that EZ had against Joe,but not a right to be repaid by Joe.
B)a right to be repaid by Joe,but not any right that EZ had against Joe.
C)any right that EZ had against Joe and a right to be repaid by Joe.
D)none of the choices.

Question 48

Thirty-one days before filing a petition in bankruptcy,Gavin transfers property and makes payments that favor one creditor over another.These are​

A)affirmation agreements.
B)preferences.
C)secured interests.
D)unsecured debts.

Question 49

Rico borrows $110,000 from Sterling Bank to buy a home.If he fails to make payments on the mortgage,the bank has the right to repossess and auction off the property securing the loan.This is​
Foreclosure.

A)attachment.
B)execution.
C)foreclosure.
D)subrogation.

Question 50

Robin's home is in a state that has a $30,000 homestead exemption.Robin defaults on a $60,000 debt that she owes to Suburban Mortgage Company.Robin's home is sold at auction for $80,000.From the proceeds,Suburban may recover​

A)$0.
B)$30,000.
C)$50,000.
D)$60,000.

Question 51

Teri files a petition for bankruptcy.Her creditors must file with the court their proof of claims against her assets within​

A)fifteen days of the order for relief.
B)thirty days of the filing of the petition.
C)sixty days of the automatic stay.
D)ninety days of the creditors' meeting.

Question 52

Maggie is a surety for Jo's debt to Bill.Bill and Jo decide to make material changes to the original contract without informing Maggie.Maggie is​

A)bound by the contract including the changes.
B)discharged completely.
C)bound by the contract according to the original terms.
D)bound by the contract unless she objects within thirty days.

Question 53

Jo files a voluntary petition for bankruptcy under Chapter 7.The court will likely deny a discharge of her debts if she​

A)conceals records of her financial condition to defraud a creditor.
B)does not have sufficient assets to pay all her secured creditors.
C)filed for bankruptcy 12 years ago.
D)has a criminal record.

Question 54

Carly files a petition in bankruptcy.One of the goals of bankruptcy law with respect to a debtor is to​

A)encourage the continued use of credit to borrow funds.
B)ensure that third parties will continue to guarantee loans.
C)provide a fresh start,free from creditors' claims.
D)shield assets from creditors' claims.

Question 55

Lindsay operates a sole proprietorship,a corporation,and a partnership.She wants to obtain relief for her individual debts and the debts of her corporation and partnership.For each of these,she may file a petition in bankruptcy for relief through​

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)any of the choices.

Question 56

Matt files a petition for a discharge in bankruptcy.His failure to appear at a meeting of the creditors listed in his schedules may result in him being​

A)denied a discharge of bankruptcy.
B)fined.
C)held in contempt.
D)imprisoned.

Question 57

Larry has fifteen creditors.To force Larry into bankruptcy proceedings,at least three creditors must join the petition and their unsecured claims must add up to at least​

A)$500.
B)$15,325.
C)$100,000.
D)$500,000.

Question 58

Rob's creditors try to force him into involuntary bankruptcy.The creditors will be unsuccessful if Rob​

A)owns a business that employs fewer than ten people.
B)is a farmer.
C)has a medical condition.
D)has to pay child support.

Question 59

Donna goes through an involuntary bankruptcy proceeding.An involuntary bankruptcy occurs when​

A)a debtor files forms designated for the purpose in a bankruptcy court.
B)a debtor is unable to pay his or her debts as they come due.
C)a debtor's creditors force the debtor into bankruptcy proceedings.
D)a debtor's debts exceed the fair market value of his or her assets.

Question 60

Patty files a petition in bankruptcy.At the moment of filing​

A)an automatic stay goes into effect.
B)Patsy's debts are discharged.
C)Patsy's petition is dismissed.
D)Patsy's property is distributed to her creditors.

Question 61

Ozzie files a petition in bankruptcy for relief through an individual's repayment plan.He is granted a discharge.Debts that will not be discharged include claims for​

A)all debts provided for by the plan.
B)money owed for services rendered.
C)allowed claims not provided for by the plan.
D)credit-card debt.

Question 62

Jordan believes that she needs to obtain a discharge in bankruptcy through an individual's repayment plan.This proceeding can be initiated by a filing of a petition by​

A)a trustee.
B)a debtor.
C)a corporation.
D)a partnership.

Question 63

Lynn,the owner of Market Sales Company,sells the firm to Nell for a note payable to Lynn for $100,000.Nell does not pay the note and files for bankruptcy under Chapter 7.The debt represented by the note is​

A)dischargeable if $100,000 was a high price for the firm.
B)dischargeable under any circumstances.
C)not dischargeable if Nell concealed assets to defraud Lynn.
D)not dischargeable under any circumstances.

Question 64

Jill believes that she should file a plan for a Chapter 13 discharge in bankruptcy.A court will confirm her bankruptcy plan if it provides for​

A)the completion of all payments to all creditors within six years.
B)the payment of 100 percent of all obligations in full.
C)the surrender of all collateral to the creditors.
D)the turnover of the debtor's future income to the trustee.

Question 65

To adjust debt and institute a repayment plan,Don,a family fisherman in the Pacific Ocean off the coast of Alaska,may file a petition in bankruptcy for relief under the Bankruptcy Code's Chapter​

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

Question 66

Sunn Energy,Inc. ,needs funds to meet its payroll,to make other current operating expenses,and to pay its creditors.Terence,Sunn's only shareholder,loans the company $100,000 and accepts a promissory note signed on behalf of Sunn by Ulrich,the firm's accountant.Sunn's financial problems continue,however,and the firm's creditors file an involuntary petition to force it into bankruptcy.Is Terence entitled to repayment of the loan to Sunn? If so,what is the priority of the claim?​

Question 67

eGear is a retail seller of cellphones,televisions,and other consumer electronic equipment.eGear sells Fiona a $2,400 large-screen,high-definition set on a retail installment security agreement in 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 centrally.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 and whether eGear has priority over the trustee in bankruptcy to any proceeds from the disposal of the set.

Question 68

Zeke files a petition for bankruptcy under Chapter 13.Zeke's Chapter 13 plan must provide for​

A)the turnover of his future income to the trustee.
B)his attendance at a credit-counseling briefing.
C)adequate means for the petition's execution.
D)a preference for one creditor over another.

Question 69

Spicy Pizza,Inc. ,files for bankruptcy under Chapter 11.Spicy's reorganization plan must contain​

A)a plan to turn over its future income to the trustee.
B)a certificate proving attendance at a credit-counseling briefing.
C)a provision of adequate means for the plan's execution.
D)a statement of preference for one creditor over another.

Question 70

Farrah buys a car from Go Motors,financing the purchase through a loan.Less than a year later,she files for bankruptcy under Chapter 13.Her plan must provide that Go has a lien on the car until the entire debt is paid​

A)under no circumstances.
B)if Go extended credit for all or part of the purchase price of the car.
C)if any of the loan for the car remains unpaid,regardless of the creditor.
D)if her other creditors do not object.

Question 71

To adjust debt and institute a repayment plan,Diana-who is not a corporation,a partnership,or a family farmer or fisherman-may file a petition in bankruptcy for relief through​

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)a straight bankruptcy plan.

Question 72

Builders Construction files a voluntary petition for bankruptcy.In listing its assets,Builders intentionally omits certain assets,including plots of undeveloped real estate.After Builders is granted a discharge,Commercial Electric,one of Builders' unsecured creditors whose claims were discharged,learns of the fraud.Commercial Electric can​

A)do nothing.
B)enforce its claim against Builders.
C)file an involuntary petition for bankruptcy against Builders.
D)take possession of the stones with or without a breach of the peace.