Question 1

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires that a debtor who wishes to file under any chapter of the bankruptcy law must,unless exempt,receive individual or group credit counseling from an approved,not-for-profit,individual or group budget or credit counseling agency by telephone or online.

Accepted Answer

This is a requirement of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Question 2

Under Chapter 7 bankruptcy the trustee collects the debtor's exempt property,sells it and dispenses the proceeds to the creditors in a fair manner.

Accepted Answer

Under Chapter 7 bankruptcy, the trustee collects and sells the debtor's non-exempt property to distribute the proceeds to the creditors. Exempt property is protected and the debtor is allowed to keep it.

Question 3

An individual or business that owes money is said to be a creditor.

Accepted Answer

An individual or business that owes money is said to be a debtor, not a creditor. A creditor is someone who is owed money or has extended credit to someone else.

Question 4

The means test uses a complex formula that measures an individual's income relative to the median income of the people in the state where he or she resides.

Accepted Answer

The means test does use a complex formula that takes into account an individual's income in relation to the median income of their state. This is used to determine eligibility for certain government benefits and programs.

Question 5

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 does not allow the bankruptcy court to disallow a petition for a Chapter 7 bankruptcy if the individual filing for bankruptcy earns an income that is too high to meet the standards of the means test.

Accepted Answer

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires the bankruptcy court to apply the means test to determine if an individual's income is too high to qualify for Chapter 7 bankruptcy. If their income is above the state median income, they may be required to file for Chapter 13 bankruptcy instead.

Question 6

Two types of actions by the debtor are prohibited under bankruptcy law: preferential payment and fraudulent transfer.

Accepted Answer

This is true. Under bankruptcy law, preferential payments are payments made to creditors before the bankruptcy filing that give them an advantage over other creditors. Fraudulent transfers are transfers of property made with the intent to hinder, delay, or defraud creditors. Both of these actions are prohibited by bankruptcy law.

Question 7

Priority debts are deemed to be sufficiently important that they do not have to be paid in full.

Accepted Answer

Priority debts are debts that are deemed to be sufficiently important that they must be paid in full before other debts. Examples of priority debts include taxes owed to the government, child support payments, and certain debts owed to employees, such as back pay and wages owed in lieu of notice.

Question 8

Under the provisions of Chapter 13 of the federal bankruptcy law,the debtor retains his or her property,but agrees to pay back all or a portion of his or her debts on an interest free
basis over a period spanning from three to five years.

Accepted Answer

This is an accurate description of Chapter 13 bankruptcy, as the debtor does retain their property and agrees to pay back their debts on an interest-free basis over a period of three to five years.

Question 9

A contract that is entered into by the debtor that includes a preferential payment is void.

Accepted Answer

According to bankruptcy law, a preferential payment made by a debtor to a creditor before filing for bankruptcy is considered voidable. This means that the payment can be recovered by the bankruptcy trustee for distribution to all creditors. However, the contract itself is not void.

Question 10

Bankruptcy law provides that no debts survive the bankruptcy.

Accepted Answer

Bankruptcy law does not necessarily mean that all debts are discharged. Certain debts, such as student loans, taxes, and child support payments, may not be eliminated through bankruptcy.

Question 11

Chapter 15 provides a framework for bankruptcy cases in which foreign countries are involved.

Accepted Answer

Chapter 15 of the U.S. Bankruptcy Code deals with bankruptcy cases involving foreign countries or foreign entities with assets in the United States. It provides a framework for cooperation between U.S. courts and foreign courts, and allows for recognition of foreign bankruptcy proceedings in the U.S. court system.

Question 12

Under Chapter 11 major decisions must be approved by management.

Accepted Answer

Under Chapter 11, major decisions must be approved by the bankruptcy court, not just management. This is because Chapter 11 is a legal process that is overseen by the court to ensure that all creditors are treated fairly and that the debtor is able to reorganize and emerge from bankruptcy.

Question 13

Bankruptcy is the legal state that occurs when a debtor is insolvent,is in default,and is unable to fulfill his or her obligations to pay back his or her creditors.

Accepted Answer

Bankruptcy occurs when a debtor is unable to fulfill their financial obligations and is in default, resulting in legal insolvency.

Question 14

Bankruptcy law is divided in clauses.

Accepted Answer

Bankruptcy law is divided into chapters, not clauses, which outline specific types of bankruptcy proceedings and processes.

Question 15

Insolvency often leads to default.

Accepted Answer

Insolvency occurs when a company is unable to pay off its debts. This often leads to default on those debts, as the company may not have the financial resources to make the required payments.

Question 16

The most common type of bankruptcy filed by individuals and businesses is Chapter 7.

Accepted Answer

Chapter 7 bankruptcy is the most common type filed by individuals and businesses.

Question 17

Bankruptcy filings can be made for the sole purpose of defrauding creditors.

Accepted Answer

Bankruptcy filings made with the intent to defraud creditors are illegal and considered fraudulent. Bankruptcy laws are designed to provide relief to honest debtors, not to facilitate fraud.

Question 18

A secured debt is a loan for which a specific asset is used as collateral,or pledged.

Accepted Answer

A secured debt is a type of loan in which the borrower pledges an asset as collateral for the loan. The lender can seize the pledged asset if the borrower defaults on the loan. Examples of secured debt include mortgages and car loans.

Question 19

The purpose of Chapter 9 is to provide a municipality with a debt repayment plan,rather than to require the liquidation of municipal assets.

Accepted Answer

Chapter 9 of the United States Bankruptcy Code is designed to provide financially distressed municipalities with a debt repayment plan, rather than forcing them to sell off their assets to pay off their debts.

Question 20

A voluntary filing occurs when the debtor himself or herself files a bankruptcy petition.

Accepted Answer

A voluntary bankruptcy filing is when the debtor initiates the filing by submitting a petition to the bankruptcy court. This is in contrast to an involuntary bankruptcy filing, where creditors file a petition against the debtor.

Quiz 21: Bankruptcy