Deck 40: Bankruptcy

Question 1

Jake, a businessman, filed for bankruptcy and was declared insolvent by the courts. He owed $15,000 each to two creditors and $5,000 each to two others. The courts also decreed that he should sell his house worth $30,000, to pay his debts. Which of the following is legally permissible in this scenario?

A) Jake is entitled to sell his house and pay the creditors on a pro-rata basis.
B) Jake is entitled to sell his house and pay whomsoever he chooses.
C) Jake is entitled to sell his house and pay the creditors he owes the maximum amount of money to.
D) Jake is entitled to sell his house and pay the creditors he owes the least amount of money to.

Answer 1

A

Question 2

Under Chapter 11, the Bankruptcy Code provides a special rehabilitation system designed for businesses so that they may be reorganized rather than liquidated.

Answer 2

True

Question 3

Property such as household effects is exempt from seizure for the payment of debts.

Answer 3

True

Question 4

State the debts that cannot be avoided by bankruptcy.

Question 5

Debts due on a judgment for intentional injury to others cannot be avoided by bankruptcy.

Question 6

Claims for alimony and child support can be avoided by bankruptcy.

Question 7

Unsecured claims are those for which creditors have no lien on specific assets.

Question 8

Bankruptcy law uses different procedures in liquidating the estate under a voluntary bankruptcy proceeding and an involuntary one.

Question 9

Which of the following is legally permissible after a debtor is discharged from his debt?

A) A creditor can collect his dues from the debtor's relatives.
B) A debtor is entitled to refuse child support payments.
C) A creditor is allowed to collect up to 25 percent of his dues.
D) A debtor is allowed to engage in business activities.

Question 10

Under Chapter 7 of the Bankruptcy Code, which of the following is classified as a special circumstance to file for bankruptcy?

A) Debt caused by a major hurricane
B) Debt caused by gambling losses
C) Debt caused by real estate losses
D) Debt caused by faulty stock market investment

Question 11

Which of the following best describes cram down?

A) It is a duty that the debtor must perform during bankruptcy as assigned by court.
B) It is a past money transfer to a debtor's relative disallowed by court.
C) It is an involuntary bankruptcy suit filed against a debtor.
D) It is a reorganization plan imposed by court in spite of creditors' objections.

Question 12

A husband and wife cannot file a bankruptcy petition jointly.

Question 13

Before debtors may file for bankruptcy, they must complete a 45-minute credit counseling session in the six months prior to filing.

Question 14

A court will enter an order for relief on the filing of an involuntary bankruptcy petition if the debtor does not pay debts as they become due.

Question 15

Under the Bankruptcy code, bankruptcy is applicable to:

A) any bank which operates in two different states.
B) any person who has a place of business.
C) any loan association with a fixed capital.
D) any insurance company with a business property.

Question 16

Which of the following is true of bankruptcy petitions?

A) Involuntary petitions require petitions from a minimum of two creditors.
B) A creditor's claims must not be subject to a valid dispute.
C) A creditor's claims can be contingent.
D) Voluntary petitions cannot be filed by farmers.

Question 17

Which of following debts can be avoided by bankruptcy?

A) Wages earned within three months prior to bankruptcy proceedings
B) Debts owed by reason of embezzlement
C) Educational loan debts
D) Claims for alimony and child support

Question 18

Which of the following is prohibited 90 days prior to filing a bankruptcy petition?

A) A debtor inheriting ancestral property
B) A debtor receiving valuable property from relatives and friends
C) A debtor selling his assets to liquidate them
D) A debtor clearing his debts to one creditor while ignoring others

Question 19

A cram down can be imposed even if dissenting unsecured creditors are not paid in full.

Question 20

Any person who has a property in the United States can be a debtor under the Bankruptcy Code.