Question 1

Kastner Lumber Ltd. supplies lumber to Solti Construction Corp. Solti gets into financial difficulty and Kastner pressures it to return the lumber sent but not paid for. One month after returning the lumber, Solti goes bankrupt. Solti's trustee in bankruptcy wants to recover the value of the returned lumber from Kastner. Which of the following is TRUE?

Accepted Answer

The return of the lumber could be considered a fraudulent preference if it was done to favor Kastner over other creditors before Solti's bankruptcy.

Question 2

Karim Manji owns a small electronics business that is starting to lose money because a big box store opens nearby. As a precaution, he transfers title to his home, which is currently in his name, to his wife. A week later, insolvent, he files for bankruptcy. Which of the following is true respecting the transfer of Karim's interest in the house? This is

Accepted Answer

Karim's transfer of his interest in the house to his wife is a fraudulent conveyance because it was made with the intent to hinder, delay, or defraud his creditors.

Question 3

Donald Tramp declares bankruptcy. He has significant arrears of spousal and child support. He also owes $500 in parking tickets. It is his first bankruptcy. After nine months, he applies for a discharge. Which of the following is TRUE?

Accepted Answer

A discharge in bankruptcy does not release obligations for spousal and child support (B) and parking tickets (D). For first-time bankrupts, a discharge is usually automatic after a certain period (C).

Question 4

Which of the following would be a preferred creditor in a bankruptcy?

Accepted Answer

The answer of Which of the following would be a...

Question 5

Jake declared personal bankruptcy in Ontario in 2015. Which of the following assets could Jake NOT keep?

Accepted Answer

The answer of Jake declared personal bankruptcy in Ontario in...

Question 6

Which of the following statements concerning an unpaid supplier of goods to a bankruptcy business is correct?

Accepted Answer

An unpaid supplier of goods is generally considered an unsecured creditor unless they have taken specific steps to secure their interest, such as registering a purchase money security interest under a Personal Property Security Act, which would allow them to repossess goods.

Question 7

Duncan Corp. is declared bankrupt. The Royal Bank has a mortgage on its manufacturing plant. Employees have a claim for $1,000 each for unpaid wages. The trustee in bankruptcy's fees are $10,000. An unpaid supplier of steel has a claim for products supplied. Which of the above is a secured creditor?

Accepted Answer

The bank is a secured creditor because it has a mortgage on the manufacturing plant, giving it a security interest in the property.

Question 8

Duncan Corp. is declared bankrupt. The Royal Bank has a mortgage on its manufacturing plant. Employees have a claim for $1,000 each for unpaid wages. The trustee in bankruptcy's fees are $10,000. An unpaid supplier of steel has a claim for products supplied. Which of the above is a preferred creditor under the BIA?

Accepted Answer

Under the Bankruptcy and Insolvency Act (BIA) in Canada, preferred creditors include employees for unpaid wages up to a certain limit and the trustee in bankruptcy for their fees.

Question 9

Karim Manji owns a small electronics business that is starting to lose money because a big box store opens nearby. Knowing that the business is about to go under, he uses the business's cash on hand to pay one of his creditors, Sushil Manji his cousin. A week later, insolvent, he files for bankruptcy. Which of the following is true respecting the payment to Manji?

Accepted Answer

The payment to Sushil Manji can be considered a fraudulent preference because he is a non-arms-length party and one of several creditors, which can be seen as an attempt to favor one creditor over others before filing for bankruptcy.

Question 10

Which of the following does not belong in this group?

Accepted Answer

The answer of Which of the following does not belong...

Question 11

Roger was self-employed and failed to pay his taxes and owed Revenue Canada $85,000 in taxes. He declared bankruptcy in 2004 and never had to repay the tax debt. In 2015 Roger again declared bankruptcy and this time he owed Revenue Canada $120,000 in unpaid taxes. As a result Roger

Accepted Answer

In Canada, if a person declares bankruptcy more than once, the court may refuse to discharge tax debts until some payment is made, especially if the debts are due to repeated non-payment of taxes.

Question 12

Manuel was deeply in debt. Manuel decided to sell his $20,000 car to his cousin for $4,000 and then 9 months later Manuel declared bankruptcy. The court would

Accepted Answer

The answer of Manuel was deeply in debt. Manuel decided...

Question 13

Martin was owed $10,000 in wages he had earned in the past 2 months but had not been paid by his employer Allsafe Industries Inc. Allsafe has now been forced into bankruptcy by the bank. Which of the following statements is TRUE?

Accepted Answer

The answer of Martin was owed $10,000 in wages he...

Question 14

Duncan Corp. is declared bankrupt. The Royal Bank has a mortgage on its manufacturing plant. Ten employees have a claim for $1,000 each for unpaid wages for the week prior to bankruptcy. The trustee in bankruptcy's fees are $10,000. An unpaid supplier of steel has a claim for products supplied. What class of creditor are the employees?

Accepted Answer

Employees with claims for unpaid wages are considered preferred creditors in bankruptcy proceedings, meaning they have priority over unsecured creditors but are subordinate to secured creditors.

Question 15

Which of the following would NOT be discharged in a bankruptcy?

Accepted Answer

Student loans are typically not discharged in bankruptcy unless the debtor can prove undue hardship, which is a difficult standard to meet.

Question 16

Duncan Corp. is declared bankrupt. The Royal Bank has a mortgage on its manufacturing plant. Employees have a claim for $1,000 each for unpaid wages. The trustee in bankruptcy's fees are $10,000. An unpaid supplier of steel has a claim for products supplied. What class of creditor is the supplier of steel?

Accepted Answer

The supplier of steel is considered an unsecured creditor because they do not have any collateral backing their claim, unlike secured creditors who have specific assets pledged as security.

Question 17

Which of the following statements is FALSE?

Accepted Answer

A discharge in personal bankruptcy can be granted even if not all debts are paid in full, depending on the circumstances and legal provisions.

Question 18

At the time of its bankruptcy, Lederhosen Ltd. had the following assets: a sewing machine with a fair market value of $35,000, accounts receivable of $15,000, and general business assets of $3,000. Its creditors, and the amounts owing to them, were the following: the provincial Workers' Compensation Fund - $8,000; a leather supplier - $3,000; an unsecured business lender - $5,000; and a bank - $40,000, for a loan secured by a general security agreement which had been perfected under the Personal Property Security Act. Bankruptcy expenses in involved trustee fees of $2,500 and legal fees of $2,000. In this case the money remaining to be divided among the unsecured creditors is:

Accepted Answer

The answer of At the time of its bankruptcy, Lederhosen...

Question 19

Buta Corp.,a shoe manufacturer, makes a commercial proposal under the Bankruptcy and Insolvency Act. The company's premises are heated by gas. Cowhide Co. normally supplies the leather for making the shoes. Which of the following is TRUE?

Accepted Answer

The gas company must continue to supply gas but only if it is paid for any gas supplied after the date of the proposal. Cowhide must continue to supply leather but only if it is paid for the leather after the date of the proposal.

Question 20

Which of the following debts is NOT discharged in a personal bankruptcy?

Accepted Answer