Deck 28: Bankruptcy and Reorganization

Question 1

Which of the following is true of the meeting of the creditors?

A) A meeting of the creditors is called before the court grants an order for relief.
B) The bankruptcy judge cannot attend the meeting of the creditors.
C) In the first meeting of the creditors, a debtor is questioned by a jury constituted for the purpose.
D) Questions regarding the debtor's possible concealment of assets are not permitted during the meeting of the creditors.

Answer 1

B

Question 2

Which of the following federal acts substantially amended the federal bankruptcy law in 2005?

A) Bankruptcy Reform Act of 1978
B) Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
C) the Nelson Act
D) the Chandler Act

Answer 2

B

Question 3

Which of the following chapters of the bankruptcy code deals with adjustment of debts of a family farmer or fishermen with regular income?

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

Answer 3

B

Question 4

Bankruptcy law is exclusively federal law; there are no state bankruptcy laws.

Question 5

Sam wants to file a petition for bankruptcy. Which of the following is true in this context?

A) Sam need not submit a list of creditors; it is obtained by the court upon investigation.
B) Sam's bankruptcy petition cannot be filed electronically.
C) Only Sam's attorney can file his bankruptcy petition.
D) Sam's attorney is liable for perjury if information filed by Sam is incorrect.

Question 6

Bankruptcy is primarily a state law.

Question 7

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has been criticized as being too "creditor-friendly."

Question 8

Which of the following is true of bankruptcy law in the United States?

A) The 1978 bankruptcy law made it easier for debtors to be relieved of much of their debt.
B) The 1978 bankruptcy law was deemed to be "creditor friendly."
C) The bankruptcy act of 2005 makes it easier for debtors to be relieved of their debts under federal bankruptcy law.
D) The 2005 bankruptcy act has been called "debtor friendly."

Question 9

Chapter 7 of the Bankruptcy Code of the bankruptcy act of 2005 primarily deals with ________.

A) reorganization
B) adjustment of debts of a family farmer or fisherman with regular income
C) adjustment of debts of an individual with regular income
D) liquidation

Question 10

A U.S. Trustee is a federal government official who has responsibility for handling and supervising many of the administrative tasks associated with a bankruptcy case.

Question 11

The Bankruptcy Reform Act of 1978 made it easier for debtors to file for bankruptcy and have their unpaid debts discharged.

Question 12

There are separate state and federal bankruptcy laws.

Question 13

Bankruptcy petitions cannot be filed by the debtor without the assistance of an attorney or filing service.

Question 14

Which of the following is true of the bankruptcy procedure?

A) A driven petition is a petition filed by a debtor that states that he or she has debts.
B) A debtor must receive prepetition credit counseling within 180 days prior to filing his or her petition for bankruptcy.
C) A voluntary petition is filed by creditors of a debtor, alleging that the debtor is not paying his or her debts as they become due.
D) A complaint is a document filed with a bankruptcy court that starts a bankruptcy proceeding.

Question 15

Bankruptcy proceedings are carried out at special U.S. Bankruptcy Courts created by the Congress.

Question 16

The bankruptcy courts are part of the federal court system.

Question 17

The fees of any attorney or filing service used for filing bankruptcy must be paid by the debtor.

Question 18

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it more difficult for debtors to file for bankruptcy and have their unpaid debts discharged.

Question 19

The filing of either a voluntary petition or an unchallenged involuntary petition constitutes a(n) ________.

A) reaffirmation agreement
B) discharge
C) order for relief
D) composition

Question 20

Article I, Section 8, Clause 4 of the U.S. Constitution states that the President has the power to establish uniform laws pertaining to bankruptcies.

Question 21

All creditors must file a proof of interest before a bankruptcy proceeding.

Question 22

A voluntary petition is a petition filed by a creditor that states that the debtor has paid his debts.

Question 23

Unscheduled claims are not dischargeable in bankruptcy.

Question 24

The suspension of certain legal actions by creditors against a debtor or the debtor's property is known as a(n) ________.

A) discharge of debt
B) composition
C) automatic stay
D) order for relief

Question 25

An order for relief occurs upon the filing of either a voluntary petition or an unchallenged involuntary petition.

Question 26

A(n) ________ is an agreement entered into by the creditor and the debtor whereby the debtor agrees to pay the creditor for a debt that is dischargeable in bankruptcy.

A) reaffirmation agreement
B) order for relief
C) discharge agreement
D) acceptance agreement

Question 27

A proof of claim is a document required to be filed by a creditor that states the amount of his or her claim against the debtor.

Question 28

A complaint is a document filed with a bankruptcy court that starts a bankruptcy proceeding.

Question 29

Which of the following best defines a proof of claim?

A) a statement by the debtor that states that he or she has debts
B) a document required to be filed by a debtor showing property that is exempt from constituting the bankruptcy estate
C) a document required to be filed by a creditor that states the amount of his or her claim against the debtor
D) a statement by creditors alleging that the debtor is not paying his or her debts as they become due

Question 30

An automatic stay refers to the suspension of certain legal actions by creditors against a debtor or the debtor's property.

Question 31

Why is a discharge of debt granted?

A) to divide the bankruptcy estate equally among all creditors
B) to relieve the debtor of the responsibility to pay some of or all of the debt
C) to divide the bankruptcy estate according to the debt owed to each creditor
D) to suspend certain legal actions by creditors against a debtor's property

Question 32

A creditor's action of perfecting liens against a debtor's property cannot be stayed.

Question 33

Describe the procedure for filing a bankruptcy petition.

Question 34

A bankruptcy trustee is a legal representative of a creditor's claim to an estate.

Question 35

In a meeting of the creditors, the bankruptcy judge questions the debtor.

Question 36

A secured creditor whose claim exceeds the value of the collateral may submit a proof of claim and become an unsecured claimant as to the difference.

Question 37

A(n) ________ is a document required to be filed by an equity security holder that states the amount of his or her interest against the debtor.

A) proof of claim
B) proof of interest
C) voluntary petition
D) involuntary petition

Question 38

The bankruptcy judge cannot attend the first meeting of the creditors.

Question 39

A bankruptcy trustee is a ________.

A) legal representative of a debtor's estate
B) claimant to the debtor's estate on behalf of a creditor
C) federal government official responsible for supervising a bankruptcy case
D) bankruptcy judge, appointed by a U.S. Bankruptcy Court

Question 40

The 2005 act requires an attorney certification whereby an attorney who represents a client in bankruptcy must certify the accuracy of the information contained in the bankruptcy petition.

Question 41

________ is a form of bankruptcy in which the debtor's nonexempt property is sold for cash, the cash is distributed to the creditors, and any unpaid debts are discharged.

A) Abusive filing
B) Dissolution of debt
C) Liquidation
D) Reorganization

Question 42

Exempt property may not be retained by a debtor who files for bankruptcy.

Question 43

Briefly explain what is included in a bankruptcy estate.

Question 44

What is a Chapter 7 discharge?

A) The termination of the legal duty of an individual debtor to pay both secured and unsecured debts before he or she is granted a court trial.
B) The termination of the legal duty of an individual debtor to pay unsecured debts that remain unpaid upon the completion of a Chapter 7 proceeding.
C) The cancellation of all debts of a debtor that remain unpaid upon the completion of a Chapter 13 proceeding.
D) An instruction to the debtor to propose a plan to pay all or a portion of the debts he or she owes in installments.

Question 45

Under the 2005 bankruptcy act, if non-exempt personal property of an individual debtor secures a claim or is subject to an unexpired lease, the debtor ________.

A) must surrender the property
B) can appeal for exemption of the property
C) must terminate the lease with immediate effect
D) cannot redeem the property

Question 46

Which of the following is true of Chapter 7 liquidation?

A) The debtor is not permitted to keep any of his or her assets.
B) The 2005 bankruptcy act has eased the process of applying for a Chapter 7 bankruptcy.
C) The debtor's future income cannot be reached to pay the discharged debt.
D) Petitioning for Chapter 7 liquidation does not permit the debtor to petition for bankruptcy under any other chapter.

Question 47

If a person's debts are subject to a Chapter 7 discharge, what does it mean?

A) that he or she needs to repay only unsecured debts
B) that he or she needs to repay only secured debts
C) that he or she needs to pay his prepetition debts with his postpetition income
D) that he or she need not repay the debt

Question 48

Gifts that a debtor is entitled to receive within 180 days after a bankruptcy petition is filed are part of the debtor's bankruptcy estate.

Question 49

How does a court order to discharge debts benefit the debtor? Under what circumstances do courts grant a discharge?

Question 50

Which of the following is true of a debtor's bankruptcy estate?

A) Only intangible personal property constitutes the bankruptcy estate.
B) No property solely owned by the debtor is exempted from the bankruptcy estate.
C) Creditors are allowed to claim exempt property.
D) Government benefits and compensations are exempted from the bankruptcy estate.

Question 51

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires that before an individual debtor receives a discharge in a Chapter 7 or Chapter 13 bankruptcy, the debtor must attend a personal financial management course approved by the U.S. Trustee.

Question 52

What is a homestead exemption?

A) investment in realty that a debtor must forfeit
B) equity in a home that a debtor is permitted to retain
C) remainder of the debtor's interest in commercial property that is returned to him after fulfilling creditors' claims
D) all of the debtor's assets converted to cash

Question 53

The 2005 bankruptcy act provides that after already getting relief under other chapters of the Bankruptcy Code, a debtor can be granted Chapter 7 relief in which of these situations?

A) six years following Chapter 11 relief
B) four years following Chapter 11 relief
C) six years following Chapter 12 relief
D) twelve years following Chapter 13 relief

Question 54

If the value of the secured interest is less than the value of the collateral securing a loan, the secured creditor is ________.

A) an undersecured creditor
B) an oversecured creditor
C) in default
D) exempt from Chapter 7 bankruptcy

Question 55

A means test is used to determine whether ________.

A) the debtor's median family income is less than the state's median family income
B) the debtor's median family income is more than the state's median family income
C) the debtor has the capability to pay prepetition debts out of postpetition income
D) the debtor would qualify to file for bankruptcy under Chapter 13

Question 56

A reaffirmation agreement is an agreement whereby a creditor agrees to discharge the debtor of certain debts that may be included in the bankruptcy.

Question 57

The ________ is a bankruptcy rule that applies to a debtor who has a median family income that exceeds the state's median family income for families the same size as the debtor's family.

A) means test
B) median income test
C) Chapter 13 discharge
D) Chapter 13 plan of payment

Question 58

Which of the following would be part of the bankruptcy estate of a debtor?

A) interest in jewelry worth $1,000
B) unmatured life insurance policy owned by the debtor
C) interests in wrongful death benefits
D) interest of $3,500 in a motor vehicle

Question 59

Which of the following is true of the median income test?

A) If a family has median family income equal to the state's median family income, the debtor does not qualify for a Chapter 7 bankruptcy.
B) If a family has median family income below the state's median family income, the debtor is subject to the "means" test.
C) If a family has median family income below the state's median family income, the debtor automatically qualifies for a Chapter 7 bankruptcy.
D) A debtor's debts are not discharged if the family median income is more than the state's median family income.

Question 60

Liquidation is also called straight bankruptcy.

Question 61

Which of the following bankruptcy methods allows the reorganization of the debtor's financial affairs?

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

Question 62

The median income test is a bankruptcy rule that states that if a debtor's median family income is at or below the state's median family income for a family the same size as the debtor's family, the debtor can receive Chapter 7 relief.

Question 63

A composition provides a longer period of time for a debtor to pay his or her debts.

Question 64

Which of the following constitutes the property of a Chapter 13 estate?

A) nonexempt property of the debtor before the case is closed
B) exempt property of the debtor before the case is closed
C) debtor's income before and after the case is closed
D) property that is exempt from Chapter 7 estate

Question 65

Chapter 13 discharges are granted to debtors before their plans of payment begin.

Question 66

Which of the following is true of a Chapter 13 petition?

A) It can be filed by all individual debtors, irrespective of their income.
B) The petitioner need not demand an extension or composition.
C) To qualify for Chapter 13, the debts must primarily be consumer debt.
D) Creditors can file a Chapter 13 petition claiming payment from a debtor.

Question 67

Which of the following is true of Chapter 11 of the Bankruptcy Code?

A) Chapter 11 is a rehabilitation form of bankruptcy that permits bankruptcy courts to supervise the debtor's plan for the payment of unpaid debts.
B) The filing of a Chapter 11 petition immediately enables creditors to recover the debtor's property.
C) Chapter 11 helps the debtor reorganize with a new capital structure so that the debtor emerges from bankruptcy as a viable concern.
D) Chapter 11 does not permit a debtor to reject executory contracts or unexpired leases.

Question 68

Which of the following does a Chapter 11 automatic stay provide?

A) automatic discharge of secured debts
B) suspension of certain legal actions against the debtor
C) creditors' foreclosure on assets given as collateral for loans
D) automatic discharge of unsecured debts

Question 69

Paulo Dessario is the owner of Paulo's Pizzeria, which has not been doing well in the last year. He files for bankruptcy under Chapter 13. Which of the following is true of Chapter 13?

A) Paulo must terminate all his business operations in the United States.
B) If the pizzeria is not exempt from the Chapter 13 estate, Paulo must close it.
C) Paulo is allowed to continue operating the pizzeria, whether or not it is exempt.
D) Paulo can only operate the pizzeria but cannot remain in possession of it.

Question 70

A person filing for bankruptcy under Chapter 11 and left in place to operate the business during the reorganization proceeding is known as the ________.

A) trustee
B) debtor-in-possession
C) consignor
D) regent

Question 71

A(n) ________ provides for the reduction of a debtor's debts.

A) extension
B) liquidation
C) limitation
D) composition

Question 72

Which of the following is true of Chapter 13 discharge?

A) It is granted before a Chapter 13 plan of payment is enforced.
B) It is not granted if the debtor has received Chapter 7 discharge in the last four years.
C) It is granted only for the secured unpaid debts of a debtor.
D) All unpaid taxes are discharged under Chapter 13 discharge.

Question 73

What is an executory contract?

A) a contract that cannot be discharged under Chapter 13
B) a contract that the debtor is obliged to perform despite filing for bankruptcy
C) an agreement between several creditors and a single debtor, dividing the debtor's property
D) a contract that has not been fully performed

Question 74

If the value of the collateral securing a secured loan is less than the secured interest, the secured creditor is an oversecured creditor.

Question 75

Liquidation is a form of bankruptcy in which the debtor's exempt property is auctioned.

Question 76

The property of a Chapter 13 estate consists of nonexempt property acquired after a case is closed.

Question 77

________ is a rehabilitation form of bankruptcy that permits bankruptcy courts to supervise the debtor's plan for the payment of unpaid debts in installments over the plan period.

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

Question 78

Under Chapter 13, a debtor retains more property than is exempt under Chapter 7 liquidation.

Question 79

What is liquidation? How does the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 affect the process of liquidation?

Question 80

Unpaid debts that the debtor incurred prior to the date of the order for relief are discharged under Chapter 7.