Question 1

The RRSPs of a bankrupt are exempt from seizure.

Accepted Answer

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Question 2

Of the preferred creditors,the highest priority of claim is

Accepted Answer

The expenses and fees of the trustee in bankruptcy are given the highest priority among preferred creditors to ensure the administration of the bankruptcy process is funded.

Question 3

As far as claims against the property of a bankrupted debtor go,the trustee pays the general creditors in priority to which of the following?

Accepted Answer

Deferred creditors are paid after general creditors, while secured, preferred, and super priority claims are paid before general creditors.

Question 4

You are a duly licensed and appointed trustee to handle the Markin Brothers bankruptcy.You have taken possession of both personal and business assets of Sam and Joe Markin.You have retrieved all the books and documents relating to their affairs.You also have the authority to do each of the following EXCEPT

Accepted Answer

A trustee in bankruptcy has the authority to manage the financial affairs of the bankrupt entity, including borrowing money, negotiating with creditors, managing the business, and hiring legal representation. However, dismissing inspectors, who are often appointed by the court or regulatory bodies to oversee the bankruptcy process, is not within the trustee's powers. Their role is to ensure compliance with legal and regulatory standards, and their dismissal would undermine this oversight function.

Question 5

A secured creditor does not have to prove its debt before its debt ranks as a claim against the bankrupt's estate.

Accepted Answer

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Question 6

Businesses are often required to extend credit as a means of increasing sales.Before granting credit,businesses are encouraged to take any of the following steps EXCEPT

Accepted Answer

Requesting personal guarantees from the principals provides an additional layer of security in case the company defaults on their payments. Not requesting this can leave the business at risk of not being able to collect the full amount owed. Therefore, all of the other options listed are encouraged steps for businesses to take before granting credit, except for not requesting personal guarantees.

Question 7

In bankruptcy proceedings,the term "settlements" refers to

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...

Question 8

On a bankruptcy,preferred creditors rank in priority before secured creditors.

Accepted Answer

Secured creditors have priority over preferred (or unsecured) creditors because they have a charge over a specific asset as collateral for the debt.

Question 9

In the context of bankruptcy proceedings,liquidating dividends are

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Question 10

Brianna,a framing contractor,has a duly registered builders' lien on the property owned by Bowing Development.This lien gives Brianna the right to

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Question 11

The court might refuse a debtor's discharge by bankruptcy for any of the following reasons EXCEPT that

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Question 12

All creditors are considered to be equal in bankruptcy law.

Accepted Answer

In bankruptcy law, creditors are categorized into different classes with varying priorities for repayment. Secured creditors typically have higher priority over unsecured creditors.

Question 13

For five years,Maxine had been regularly receiving the same bill for $850 from Credit Landscaping.She didn't think she should pay it because they botched up the landscaping around her house.However,now,after these five years,she sends them a $425 cheque with a note saying,"Take this-it's all you're going to get." This move by Maxine will

Accepted Answer

Maxine sending a partial payment with a note does not restart the statute of limitations and does not absolve her of liability for the remaining balance. However, it also does not immediately give rise to legal action nor does it necessarily result in the balance being turned over to a collection agency. Therefore, the best choice is C- have no effect on the limitation time period.

Question 14

Each of the following parties has a right to file a builders' lien EXCEPT the one that

Accepted Answer

Selling tools or machinery to the contractor does not directly contribute to the improvement of the property in a way that would typically grant a right to file a builders' lien. Builders' liens are generally reserved for parties who contribute labor, services, or materials directly to a construction project.

Question 15

Where,just before declaring bankruptcy,a person transfers title of real property to his children telling them that he wants to protect the property from bankruptcy,the transfer is a fraudulent conveyance or transfer.

Accepted Answer

The transfer of title in this scenario is considered a fraudulent conveyance or transfer because it was done with the intent to protect the property from being used to repay creditors in the event of bankruptcy. Such transfers are generally not recognized by courts and may be reversed.

Question 16

An unpaid seller who repossesses goods from a bankrupt and then sells them,can still make a claim for any deficiency in respect of those goods.

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Question 17

Where an insolvent person transfers land which he owns to his spouse at one-third of its fair market value within 12 months of his bankruptcy,his spouse may be required to pay the difference gained to the trustee in bankruptcy.

Accepted Answer

This statement is true. The transfer of assets at an undervalue within 12 months of bankruptcy is considered a voidable transaction and can be clawed back by the trustee in bankruptcy. The spouse who received the transfer may be required to pay the difference gained to the trustee.

Question 18

In most Canadian jurisdictions,a plaintiff must start court proceedings within a two-year period.Limitation periods are justified on any of the following grounds EXCEPT that

Accepted Answer

Limitation periods are not justified on the basis that they prevent defendants from hiding assets or becoming judgment proof. They are primarily intended to ensure timely pursuit of claims and preserve the integrity of evidence and witness testimony.

Question 19

A bulk sale,as defined by provincial statutes,is a sale

Accepted Answer

A bulk sale is typically defined as a sale of essentially all the stock-in-trade, fixtures, and chattels of a business. It is often used as a way to transfer ownership of a business, but it can also be used to sell off certain assets. However, it is important to note that some provincial statutes may have additional requirements or restrictions on bulk sales.

Question 20

Mike's business is not doing too well and he is contemplating bankruptcy unless things change soon.As he currently deals with his creditors,the guiding principle should be that

Accepted Answer

The guiding principle for dealing with creditors in a potential bankruptcy situation is that creditors of the same class should be treated equally. This means that all unsecured creditors should receive the same percentage of their claim and not be paid out of order based on personal preferences or relationships. This is a basic principle of bankruptcy law and helps to ensure a fair distribution of assets to all parties involved.

Quiz 29: Creditors Rights