Deck 30: Commercial and Residential Real Estate Transactions

Question 1

Where an act of bankruptcy has occurred under the Bankruptcy and Insolvency Act, _________________ may file a petition for a receiving order.

A) any creditor
B) any secured creditor
C) any creditor owed in excess of $100
D) the debtor
E) any creditor or the debtor

Answer 1

A

Question 2

In the case of a deceased bankrupt who has the following creditors:
A years worth of municipal taxes
Trustee's fees
Income Tax owing
A month's wages to an employee
A month's rent
The priority of payment would be in the following order, from highest to lowest, left to right:

A) 3, 2, 1, 4, 5.
B) 3, 1, 2, 4, 5.
C) 3, 1, 2, 5, 4.
D) 2, 4, 1, 5, 3.
E) 2, 3, 1, 4, 5.

Answer 2

D

Question 3

A married couple, with $25,000 in debts owed to each of five general creditors, plus $15,000 owed to a conditional sale vendor for home furnishings, sold their $100,000 home to the wife's parents for $50,000 and moved to an apartment. Thereafter they made a voluntary assignment, indicating remaining assets of the $50,000 cash and $15,000 in furnishings. Each general creditor will receive

A) $10,000.
B) $11,608.
C) $20,000.
D) $20,535.
E) None of the amounts are correct.

Answer 3

C

Question 4

A bankrupt tour operator has assets of $485,000, made up of a boat worth $400,000, and prepaid docking rights worth $85,000. Claims include a security interest by a bank for $425,000 in the boat, $25,000 in unpaid taxes, and $25,000 owed to each of two general creditors. Each general creditor will receive

A) $17,500.
B) $20,000.
C) $20,000, with $20,000 to taxes.
D) $21,250.
E) $21,250, with $21,250 to taxes.

Question 5

The following is a/are bankruptcy offences under the Bankruptcy Act:

A) Failure to attend an examination pursuant to the Personal Property Security Act
B) Fraudulent concealment of any property
C) Knowingly making a material omission in a statement
D) Permitting an execution to remain in place 14 days after demand for payment
E) All of these are offences

Question 6

What is the primary focus of modern bankruptcy legislation?

A) Orderly repayment of debts
B) Repayment of debts to unsecured creditors
C) Allowing the debtor to avoid full liability for debts incurred
D) Repayment of debts to statutory and secured creditors
E) None of the responses are correct.

Question 7

The Companies Creditors Arrangement Act applies to the following entities:

A) Insolvent corporations
B) Insolvent corporations with equity investors
C) Insolvent corporations with bondholders
D) Insolvent public corporations with equity investors
E) Insolvent public corporations with bondholders

Question 8

Ratner's Service Centre encountered financial setbacks over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Ratner's Service Centre must have committed an act of bankruptcy within the preceding six months, and owe its creditors at least $1,000 before the creditors may take bankruptcy proceedings against it.

Question 9

An unpaid supplier of goods who is an unsecured creditor, but can identify the goods supplied out of the inventory of a commercial bankrupt is entitled to reclaim the goods if the supply was made

A) within the 15 days preceding the bankruptcy.
B) within the 30 days preceding the bankruptcy.
C) within the 45 days preceding the bankruptcy.
D) within the 60 days preceding the bankruptcy.
E) within the 90 days preceding the bankruptcy.

Question 10

The U.S. Bankruptcy Code Chapter _____ is similar to the Canadian __________ and the U.S. Bankruptcy Code Chapter _____ is similar to the Canadian ______________.

A) 7; Bankruptcy Act; 11; Insolvency Act
B) 11; Bankruptcy Act; 7; Insolvency Act
C) 7; Companies' Creditors Arrangement Act; 11; Bankruptcy and Insolvency Act.
D) 11; Companies' Creditors Arrangement Act; 7; Bankruptcy and Insolvency Act.
E) None of the responses are correct.

Question 11

Ratner's Service Centre encountered financial setbacks over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. If the first and second mortgagees so desire, they may surrender their security to the trustee, and claim as unsecured creditors in the bankruptcy.

Question 12

Ratner's Service Centre encountered financial setbacks over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. On default, the first and second mortgagees may realize on the security of the land and building, rather than claim as creditors in the bankruptcy proceedings.

Question 13

Ratner's Service Centre encountered financial setbacks over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Ratner's Service Centre may make a voluntary assignment in bankruptcy, if it is insolvent.

Question 14

Where a consumer debtor has debts less than ___________, excluding those secured by the person's principal residence, he or she may use the summary administration procedures of the Bankruptcy and Insolvency Act.

A) $1,000
B) $5,000
C) $25,000
D) $50,000
E) $75,000

Question 15

Which of the following are true?

A) A receiving order or a voluntary assignment will create a bankruptcy.
B) A bankrupt can be fined for his actions leading to bankruptcy, and a "proposal" can stave off bankruptcy.
C) Bankruptcy is a federal matter, and inspectors are appointed by creditors.
D) Bankruptcy is a federal matter, and inspectors are appointed by creditors and a receiving order or a voluntary assignment will create a bankruptcy Todd could raise the Sale of Goods Act as a defence Although Tiny had no notice of the stoppage in transitu and it had bought the shipment in good faith for a reasonable price, nevertheless Tiny has no rights to the barrels since PlastiCo. would have had no rights to them, so Tiny cannot keep them unless it pays Natural. It can then recover the money it paid already to PlastiCo.
E) All of the responses are true.

Question 16

Where a bank becomes bankrupt, its dissolution will be governed by

A) the Bankruptcy and Insolvency Act.
B) the Companies' Creditors Arrangement Act.
C) the Winding Up Act.
D) provincial legislation.
E) None of the responses are correct.

Question 17

Ratner's Service Centre encountered financial setbacks over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. If the mortgagees dispose of the land and building, and the proceeds are sufficient to pay the first mortgage in full, and one half of the second, the second mortgagee may claim for the balance in the bankruptcy as an unsecured creditor.

Question 18

The assets of a bankrupt are administered by the __________, whose actions are reviewed by the ___________.

A) superintendent in bankruptcy, inspectors
B) trustee, creditors
C) liquidator, trustee
D) trustee, inspectors
E) superintendent in bankruptcy, creditors

Question 19

The word "bankrupt" has an interesting derivation.

A) It is derived from the Latin words meaning "no money."
B) It is derived from the Roman tradition of jousting between debtors and creditors.
C) It is derived from the Norweigan words meaning "no money."
D) It is derived from the Italian words meaning "broken bench."
E) None of the answers are correct.

Question 20

When does insolvency occur at law?

A) When cash flow is insufficient to pay one's current liabilities.
B) When total liabilities exceed total assets.
C) When a debtor is unable to pay debts as they become due.
D) When expenses exceed revenues.
E) When liabilities exceed revenues.

Question 21

Any Canadian corporation with outstanding issues of bonds may avail itself of the Companies' Creditors Arrangement Act, rather than make an assignment in bankruptcy under the Bankruptcy and Insolvency Act.

Question 22

Where debts exceed $1,000, an insolvent person is upon petition of creditors, a bankrupt person.

Question 23

When an asset subject to a security interest fails to satisfy the debt owing to that creditor that creditor ranks as a preferred creditor to the balance of the estate.

Question 24

An inspector is agent for the bankrupt, overseeing the dealings of the trustee.

Question 25

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Trade Creditors share pro rata on the basis of "cents on the dollar" of their claims.

Question 26

No claim against the remaining assets of a bankrupt person is stronger than that of the Crown.

Question 27

Once a person is petitioned into bankruptcy, a personal balance sheet at that moment would show zero assets.

Question 28

In the absence of fraud, a bankrupt with an estate of $62,000 and general debts of $107,000 is as liable to receive a discharge as a bankrupt with an estate of $27,000 and general debts of $7,000.

Question 29

If on bankruptcy the bankrupt's cash account rests at zero, even secured creditors will receive nothing.

Question 30

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Municipal taxes take priority over trade creditors in the distribution of the assets of the bankrupt firm.

Question 31

A proposal to creditors, if rejected by them, creates automatically a bankrupt in the proposer-debtor.

Question 32

Ratner's Service Centre encountered financial setbacks over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. The employees of the company are treated in the same manner as the trade creditors for the payment of the entire amount of their wage claims.

Question 33

Under the Bankruptcy and Insolvency Act, a person in financial difficulty has three distinct routes upon which a start toward a resolution of their problems can commence; two of them are voluntary, and one is involuntary.

Question 34

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Any funds remaining after the claims of the employees, the trustee, and the municipality, would be distributed to the trade creditors.

Question 35

Consider this estate: Assets of $135,000, which includes a boat valued at $38,000 subject to a security interest of $60,000. The government is owed tax arrears of $7,000, and Smith an unsecured creditor is owed $120,000. Smith will receive $90,000.

Question 36

George's sole proprietorship is nearing insolvency rapidly. He goes to New York for six months to solicit funds for a bailout. His worried creditors petition his bankruptcy. They will fail.

Question 37

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Expenses of the trustee take priority over municipal taxes in the distribution of assets of the bankrupt firm.

Question 38

Where a formal proposal made by a debtor is rejected by his or her unsecured creditors, the debtor is deemed to be insolvent.

Question 39

A corporation becomes a legal bankrupt when its total liabilities exceed total assets.

Question 40

Ratner's Service Centre encountered financial set backs over a period of time, and eventually found itself insolvent. Among its creditors were the first and second mortgagees of the land and building which Ratner's owned, trade creditors, employees who had not been paid wages, and the municipality, for arrears of property taxes. Ratner's decides not to make a proposal to its creditors. Under the Bankruptcy and Insolvency Act, employees have first priority claims against the assets of the bankrupt firm.

Question 41

Consider the following quotation: "The Bankruptcy and Insolvency Act just gives people a free ride. People can run up debts and then walk away from them, letting their creditors take the fall. That's not right. In the "good old days," "Debtor's Prison" took care of people with that kind of irresponsible attitude." What aspects of the philosophy are behind the Bankruptcy and Insolvency Act, and what provisions of the Act would you bring to this person's attention?

Question 42

The Bankruptcy and Insolvency Act provides for the stay of all proceedings and executions against an individual upon bankruptcy, or the acceptance of a proposal. Discuss the rationale and effect of this provision.

Question 43

A courier operation, Sampson Couriers Ltd., made an arrangement with Allplaces Airlines. Allplaces Airlines would look after transporting all of Sampson Courier packages from Toronto and other major Canadian cities. For this service, Allplaces Airlines would bill them the sum of $15,000 a month. This arrangement continued on for approximately two years, with Sampson Couriers making their payments within the stipulated time period, or within a few days after it fell due. Allplaces Airlines took this in stride. However, when two successive months went by without receiving a payment, the president of Allplaces telephoned his counterpart at Sampson, and demanded payment within a week. The president of Sampson told him he didn't think it would be possible to pay within a week. After the week had expired, Allplaces filed a claim against Sampson which went undefended. Allplaces attempted to realize on its judgment, and sent the sheriff to Sampson's premises. However as Sampson's is primarily a service firm there was nothing to seize of sufficient value to satisfy the debt. Allplaces petitioned the bankruptcy of Sampson. Discuss the implication of these actions, and the likely disposition of the petition.
C.B.R. (N.S.) 68 (Ont.S.C.).

Question 44

You move to a large, expensive city to take up new employment following graduation. After two years, in reconciling your debts, you find that this new lifestyle with its expenses, and perhaps some inattention on your part, has left you in debt well beyond your means. All new sources of cash have been exhausted (family, friends, etc.) Describe your next series of moves.

Question 45

Acme Co. purchased a new building for $85,000. To do so, it borrowed $45,000 from Shapiro Limited and gave Shapiro a first mortgage on the building. Acme also borrowed $40,000 from Basco Limited and gave Basco a second mortgage. Both mortgages were duly registered. Acme later goes into bankruptcy. Below is Acme's most recent Balance Sheet.

Question 46

Where a formal proposal made by a debtor is rejected by his or her unsecured creditors, the debtor is deemed to have made an assignment in bankruptcy.

Question 47

"The existence and degree of development of bankruptcy proceedings can be taken as a reasonably accurate measure of the development of a market economy." Discuss this statement, treating the significance to an economic system of having bankruptcy proceedings, the question of priorities, and presence of criminal sanctions.