Deck 34: Bankruptcy

Question 1

By operation of law, the trustee automatically becomes the owner of all of the debtor's property in excess of the property to which the debtor is entitled under exemption laws.

Answer 1

True

Question 2

Stockbrokers are eligible to file Chapter 11 bankruptcy.

Answer 2

False

Question 3

Regardless of whether all debts were disclosed in the petition, all debts are discharged in bankruptcy.

Answer 3

False

Question 4

The filing of an involuntary bankruptcy case petition results in an order of relief.

Question 5

A payment by a debtor in the ordinary course of business, such as the payment of a utility bill, will not be set aside by the bankruptcy trustee.

Question 6

If a trustee is not elected by creditors, an interim trustee will be appointed by the court.

Question 7

If the debtor is generally not paying debts as they become due, the debtor may be subject to an involuntary bankruptcy petition.

Question 8

A transfer made to a relative 6 months before filing a bankruptcy petition is most likely a preferential transfer.

Question 9

Jurisdiction over bankruptcy proceedings is vested in the federal district courts.

Question 10

In order to be eligible for Chapter 13 bankruptcy an individual must have secured debts of less than $1,000,000.

Question 11

A debtor may recover damages against any creditor who filed an involuntary bankruptcy petition against the debtor in bad faith.

Question 12

A creditor must only file a proof of claim if the bankruptcy trustee does not know of the existence of the claim.

Question 13

The balance sheet test is merely a comparison of assets to liabilities without considering whether the debtor will be able to meet future obligations as they become due.

Question 14

An involuntary bankruptcy case is commenced by creditors filing a petition with a bankruptcy court.

Question 15

The holder of a claim that is the subject of a bona fide dispute may be counted as a petitioning creditor.

Question 16

Nonprofit corporations are exempt from involuntary bankruptcy proceedings.

Question 17

The filing of a voluntary, but not an involuntary, petition operates as an automatic stay.

Question 18

In a Chapter 7 bankruptcy, the debtor's nonexempt assets are liquidated to pay debts.

Question 19

A court can dismiss a Chapter 7 petition and convert it to a Chapter 13 bankruptcy if the debtor does not satisfy the means test.

Question 20

Bankruptcy law does not regulate the manner in which the assets of the debtor are distributed; instead, distribution of the debtor's assets is solely within the discretion of the trustee.

Question 21

Creditors who hold security for payment, such as a lien or a mortgage on the debtor's property, are less affected by the debtor's bankruptcy.

Question 22

If there are twelve (12) or more creditors, at least __________ of those creditors whose unsecured and undisputed claims total __________ or more must sign the involuntary petition.

A) one (1); $14,425
B) three (3); $15,325
C) one (1); $15,575
D) three (3); $15,575

Question 23

Under no circumstances may a reorganization plan include executory contracts or collective bargaining agreements.

Question 24

The status of a trustee in a bankruptcy proceeding is best described as the:

A) prosecutor of the debtor.
B) successor to the debtor.
C) defender of the debtor.
D) protector of the debtor.

Question 25

A debtor is presumed to be insolvent on and during what number of days immediately preceding the date of the filing of a bankruptcy petition?

A) 30
B) 60
C) 90
D) 120

Question 26

Individuals and corporations, but not partnerships, may be reorganized under the Bankruptcy Code.

Question 27

In approximately 50% of all bankruptcies no unsecured creditors receive any payments.

Question 28

An involuntary petition in bankruptcy may not be commenced against: ______.

A) a nonprofit corporation.
B) an individual.
C) a for-profit corporation.
D) a railroad company.

Question 29

Debtor's exemptions are provided under federal law and thus are the same in each state.

Question 30

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a discharge is available only once every ten (10) years.

Question 31

Certain transfers of property by the debtor to a creditor within 90 days of filing may be set aside by the bankruptcy trustee as __________ transfers, and the transferred property recovered by the trustee.

A) predetermined
B) preternatural
C) preordained
D) preferential

Question 32

Under the Bankruptcy Reform Act, the "mansion loophole" increases the homestead exemption for debtors.

Question 33

After all the creditors have been paid by the trustee, any balance is turned over to the debtor.

Question 34

Costs and expenses of administration of the bankruptcy case, including trustee fees are paid before any money is disbursed to secured or unsecured creditors.

Question 35

A voluntary petition in bankruptcy may not be filed by any of the following except a(n): ______.

A) husband and wife.
B) railroad company.
C) insurance company.
D) municipality

Question 36

A discharge releases the debtor from the unpaid balance of most debts including federal taxes and tax penalties.

Question 37

Chapter 7 bankruptcy is:

A) a liquidation proceeding.
B) a reorganization proceeding.
C) an extended time payment plan.
D) always an involuntary proceeding.

Question 38

An automatic stay:

A) arises only upon the filing of a voluntary petition.
B) prevents any further interest from accruing on a debtor's outstanding debts.
C) prevents creditors from taking action outside of the bankruptcy proceeding against a debtor.
D) ends if a debtor attempts to incur additional debt after a petition has been filed.

Question 39

Where the debtor has fewer than twelve (12) creditors, how many must sign an involuntary petition?

A) one (1), assuming that the creditor's unsecured claim is at least $15,325
B) one (1), assuming that the creditor's secured claim is at least $15,575
C) three (3), assuming that the creditors' unsecured claims total at least $14,425
D) three (3), assuming that the creditors' secured claims total at least $15,575

Question 40

The filing of a bankruptcy petition operates as a(n) ______, which prevents creditors from taking action, such as filing suits or foreclosure actions, against the debtor.13

A) Reorganization
B) Order of Relief
C) Liquidation
D) Automatic Stay

Question 41

Which of the following debts is not dischargeable in bankruptcy?

A) judgments based on negligence
B) judgments based on breach of contract
C) judgments for willful and malicious injuries
D) judgments in which the creditors would receive no distribution

Question 42

The ______ is merely a comparison of assets to liabilities without considering whether the debtor will be able to meet future obligations as they become due.

A) Cost of living test.
B) Preferential transfer test.
C) Balance sheet test.
D) Means test.

Question 43

None of the following transfers may be set aside as preferences by the bankruptcy trustee except for: ______.

A) transactions for present consideration
B) payments in the debtor's ordinary course of business
C) payments of a debtor's utility bill
D) payments to a debtor's relative

Question 44

A(n) ______ is a written statement, signed by the creditor or an authorized representative, setting forth any claim made against the debtor and the basis for it.

A) Proof of Claim
B) Self-Settled Trust
C) Preferential Transfer
D) Voidable Preference

Question 45

The creditors of Sara Delano have petitioned for involuntary bankruptcy proceedings against her. Delano has been consistently late in paying her obligations for the past year. Two months before the petition was filed, a custodian was appointed to protect Delano's property. In her statement contesting the bankruptcy petition, Delano pointed out that she had dealt in good faith and could not be shown to be guilty of any act of misconduct. In addition, she cited her willingness to allow a custodian to be appointed as an indication of her intention to avoid bankruptcy and honor her obligations. Can she prevail?

Question 46

A transfer of property by a debtor within ______ prior to filing with the intent to hinder, delay, or defraud creditors is called a(n) ______.

A) 3 months, proof of claim.
B) 3 months, voidable preference
C) 12 months, proof of claim
D) 12 months, voidable preference.

Question 47

Which of the following is a correct legal conclusion regarding Chapter 11 reorganization bankruptcy?

A) Individuals, partnerships, and corporations in business may be reorganized.
B) A plan for reorganization may be filed only by a committee of creditors.
C) When a reorganization plan is confirmed by the court, the creditors can revert back to their original position if they are not satisfied with the plan.
D) Individuals within a particular class of creditors can be treated differently if they object to the reorganization plan.

Question 48

In a Chapter 11 rehabilitation plan, the debtor is able to do all of the following except:

A) keep all of the assets (both exempt and nonexempt).
B) remain in business.
C) make a settlement that is acceptable to the majority of the creditors.
D) make a preferential transfer to self-settled trust.

Question 49

Peter is employed as a shop electrician for ABC, Inc. Peter has a car being repaired and a home on which he is paying mortgage payments. Peter is contemplating filing for bankruptcy, but he is not sure which type of petition to file. Peter also wonders whether the auto repair costs and the mortgage payments are dischargeable. Which bankruptcy filing is most appropriate for Peter? Are Peter's debts dischargeable?

Question 50

A discharge does not release a person from a consumer debt to a single creditor totaling more than $5,775 for luxury goods or services if the debt was incurred within how many days of the order for relief?

A) 90
B) 120
C) 180
D) 365

Question 51

Arthur was involuntarily petitioned into bankruptcy by three of his creditors. When the trustee reviewed Arthur's books and records, the trustee discovered the following transactions: (a) Three weeks before the filing of the petition, Arthur paid cash for $17,000 worth of inventory for his store; and (b) Twelve days before the filing of the petition, Arthur paid $300 in full satisfaction of his store's most recent electric bill.?The trustee is considering attempting to set aside both of these transfers as preferential transfers. Discuss the advisability of the trustee's attempt to set aside these transfers.

Question 52

The debtor will be denied a discharge if:

A) the debtor had been extravagant.
B) the debtor incurred debts because of negligence.
C) the debtor received a discharge ten (10) years previously.
D) the debtor refused to obey a lawful order of the court.

Question 53

An extended time payment plan:

A) does not provide for a discharge of the debtor.
B) provides for a discharge of the debtor.
C) does not require creditors holding the same type or class of claim to be treated the same way.
D) will not allow the debtor to pay the debts in installments if the debtor's creditors had not originally agreed to such installments.