Question 1

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

B

Question 2

In the context of bankruptcy proceedings, liquidating dividends are

Accepted Answer

Liquidating dividends refer to payments made to creditors as the debtor's assets are sold and realized. These payments are made as part of the bankruptcy proceedings to distribute the proceeds from the sale of assets to the creditors. Liquidating dividends are not distributed to shareholders, nor do they refer to unexpected returns from assets or proceeds from the sale of assets over and above security claims.

Question 3

Which of the following statements is true in respect of builders' lien legislation?

Accepted Answer

Builders' lien legislation gives a lien claimant a claim against the land on which an improvement is made. Option A is incorrect as while the legislation does provide some protection for builders to make their claims, it does not obligate landowners to pay them. Option B is also incorrect as the legislation does not establish government-funded insurance. Option C is incorrect as subcontractors typically have a claim against the contractor, not the owner of the land. Thus, option D is the correct answer.

Question 4

The federal Bankruptcy and Insolvency Act is not intended to

Accepted Answer

The federal Bankruptcy and Insolvency Act is not intended to be a model for provincial bankruptcy legislation. The Act applies only to federally licensed insolvency trustees and is therefore not binding on provinces when they develop their own bankruptcy legislation.

Question 5

An insolvent person may voluntarily declare himself bankrupt by

Accepted Answer

The answer of An insolvent person may voluntarily declare himself...

Question 6

James had made a consumer proposal (Division II) to his creditors. He wanted a reduction and extension of time for the payment of his debts. A formal meeting was not requested by any of the creditors. Now the administrator must

Accepted Answer

The administrator must notify and file the document with all creditors, as this is the next step in the process of a Division II consumer proposal. A public notice in the newspaper is only necessary if a meeting is requested by one or more of the creditors. Providing counseling to the debtor and ensuring that all provisions meet Division I rules are not the responsibilities of the administrator in this case. Approval from the court is only required if the proposal is not accepted by the creditors.

Question 7

In a bankruptcy proceeding, the creditors can, if they wish, appoint

Accepted Answer

In a bankruptcy proceeding, creditors have the right to appoint a substitute trustee to oversee the administration of the bankrupt estate if they are dissatisfied with the current trustee.

Question 8

In bankruptcy proceedings, the term "settlements" refers to

Accepted Answer

In bankruptcy proceedings, "settlements" specifically refer to gifts of property made by the debtor before becoming bankrupt, which can be scrutinized and potentially reversed to ensure fair distribution among creditors.

Question 9

Under consumer legislation, a consumer who receives unsolicited goods:

Accepted Answer

Under consumer legislation, a consumer who receives unsolicited goods typically has no obligation to pay for or return the goods.

Question 10

Regarding bankruptcy, public policy would be primarily concerned with

Accepted Answer

Public policy in bankruptcy aims to keep economic initiative alive by allowing debtors a fresh start while ensuring creditors can recover some of their losses.

Question 11

The Steamboat Co. is Charlie's sole creditor. He owes them $6500 from his sign painting business. In order to obtain a receiving order, Steamboat must

Accepted Answer

Steamboat Co. must ensure that Charlie has committed an act of bankruptcy within the previous six months to obtain a receiving order. This is a necessary condition for initiating bankruptcy proceedings against a debtor.

Question 12

To obtain a receiving order, creditors must prove the debtor has committed an act of bankruptcy. Which of the following is NOT such an act?

Accepted Answer

Attempting to hide behind the corporate veil is not considered an act of bankruptcy. The corporate veil refers to the legal distinction between the corporation and its shareholders, and attempting to hide behind it does not constitute an act of bankruptcy.

Question 13

Laura had made a commercial proposal (Division I) to her creditors. They have accepted it by a two- thirds vote. The next step is for the trustee to

Accepted Answer

The trustee must apply to the court to have the proposal declared binding upon all the creditors after it has been accepted by the required majority of creditors.

Question 14

Jumping Jellyfish Corporation is a Canadian business that is indebted to a number of persons and entities. On January 2, 2003, the accountant of Jumping Jellyfish examines the books and makes the determination that the current debts of the corporation total $2 million, and the assets and cash total only $200,000. The accountant concludes that the corporation will be unable to pay its debts as they become due. The corporation is

Accepted Answer

The accountant determined that Jumping Jellyfish Corporation is unable to pay its debts as they become due, which means it is insolvent. However, the question does not provide enough information to conclude whether the corporation is actually bankrupt or not.

Question 15

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 during bankruptcy is that creditors of the same class should be treated equally. This means that all creditors within the same category (e.g. secured or unsecured) should receive the same proportionate payment of their claims. It is important to treat all creditors fairly to ensure a successful bankruptcy process.

Question 16

A commercial proposal made by an insolvent person is an offer made by the debtor to his creditors

Accepted Answer

A commercial proposal made by an insolvent person, also known as a Division I Proposal under the Bankruptcy and Insolvency Act in Canada, is an offer made by the debtor to his creditors for providing an orderly repayment of his debts (or some part of his debt) over a period of time. This allows the debtor to restructure their debts and avoid bankruptcy, while also providing some relief to their creditors.

Question 17

The power of the federal government over trade and commerce enables the federal government power to regulate:

Accepted Answer

The federal government has the power to regulate trade and commerce, which includes entities like the Canadian Wheat Board that deal with interprovincial and international trade.

Question 18

The Superintendent of Bankruptcy has the power to

Accepted Answer

The Superintendent of Bankruptcy has the power to investigate where a bankruptcy offence may have been committed, intervene in any bankruptcy court proceeding, issue directives to trustees or receivers, and suspend or cancel a trustee's license. Therefore, all of the above options are correct.

Question 19

Danny is thinking of bankruptcy for his business but so far has not made an assignment nor is the business subject to a receiving order. Yet, because Danny meets all the requirements of bankruptcy, the Bankruptcy and Insolvency Act refers to Daniel as

Accepted Answer

According to the Bankruptcy and Insolvency Act, someone who meets all the requirements of bankruptcy is referred to as an "insolvent person." This terminology is used even if the person has not yet made an assignment or is not subject to a receiving order. Therefore, Choice C is the correct answer. Choices A, B, D and E are not correct because they do not accurately reflect the terminology used in the Act.

Question 20

Under the Bankruptcy and Insolvency Act, the claims of unpaid employees against the assets of a bankrupt employer rank in priority:

Accepted Answer

The claims of unpaid employees are treated as preferred creditors under the Bankruptcy and Insolvency Act, meaning they have priority over unsecured creditors. However, they do not have priority over secured creditors. Therefore, option B, "partly as preferred creditors" is the correct choice.

Quiz 31: Creditors Rights