Deck 26: Bankruptcy

Question 1

Debts that cannot be discharged in bankruptcy,include all EXCEPT:

A)alimony.
B)income taxes.
C)negligence judgments.
D)fraud judgments.

Answer 1

C

Question 2

In the Jackson v.Holiday Furniture,the court held that:

A)Holiday was in violation of Chapter 13 provisions.
B)Holiday was not in violation of the Bankruptcy Code.
C)Holiday violated the automatic stay provision of the Bankruptcy Code.
D)Jackson was not entitled to any damages.

Answer 2

C

Question 3

Alimony and child support obligations are considered priority claims.

Answer 3

True

Question 4

Chapter 13 bankruptcy:

A)is used by businesses to reorganize their financial situations.
B)is an involuntary bankruptcy.
C)can be used only by individuals with a regular source of income.
D)is used by businesses to liquidate their debts.

Question 5

Even though Lilian is neither a layer nor a CPA,she can serve as a trustee in a bankruptcy case.

Question 6

Individual debtors are allowed to keep some assets in a Chapter 7 bankruptcy.

Question 7

Bankruptcy is regulated by both federal and state law.

Question 8

Creditor claims are divided into classes and the highest class must be satisfied in full before going to the next category.

Question 9

Peggy's credit card debts are mounting as her costs of insurance and fuel have dramatically increased and her income,from sporadic free-lance jobs,has dropped.Chapter 13 of the Bankruptcy Code will allow her to reorganize her debt while she keeps most of her assets.

Question 10

The Bankruptcy Code uses the term "bankrupt" for a person who cannot pay his debts.

Question 11

Generally,filing bankruptcy stops the collection activity of creditors.

Question 12

The Bankruptcy Code has two main goals: rehabilitation and liquidation.

Question 13

The start of the bankruptcy process is:

A)the submission of a plan of repayment.
B)the bankruptcy court's issuance of an order for relief.
C)a meeting of creditors.
D)the appointment of a trustee.

Question 14

Brad was having financial difficulties and thought bankruptcy might be in his future.He transferred his sports car to his brother with the agreement that if he didn't file for bankruptcy within the next 18 months,his brother would return the car to him.Brad did file for bankruptcy in ten months.The bankruptcy trustee can bring the car back into Brad's estate for the purpose of providing assets for Brad's creditors.

Question 15

Chapter 7 bankruptcy petitions are always filed voluntarily.They cannot be involuntary.

Question 16

In a Chapter 13 bankruptcy,creditors cannot force a debtor into bankruptcy; nor can they vote to confirm or reject a plan of reorganization.

Question 17

Shoe Sunshine,Inc.filed for bankruptcy protection under Chapter 11 and submitted a plan of reorganization within 120 days after filing for relief.Two of the classes of creditors voted against the plan.However,the bankruptcy judge considered the plan to be reasonable,achievable,and fair,and approved it in spite of these creditors' objections.This action by the judge is called a "cramdown."

Question 18

In Chapter 11 both creditors and debtor can propose plans of reorganization.

Question 19

Which of the following is a primary goal of bankruptcy:

A)to preserve as much of the debtor's property as possible.
B)to divide the debtor's assets fairly between the debtor and the creditors.
C)to divide the debtor's assets fairly among the creditors.
D)All of the above.

Question 20

The goal of Chapter 11is to shut down the business and distribute its assets to creditors.

Question 21

Which of the following actions would prevent a discharge of debts under Chapter 7?

A)Discharge under Chapters 7 or 11 within the past eight years.
B)Falsified records presented to bankruptcy court by debtor.
C)Failure to disclose assets.
D)All of the above would prevent a discharge of debts.

Question 22

Forever Yours,Inc.has a secured and perfected security interest in Sally's big-screen TV.On the filing date of Sally's Chapter 7 petition,the balance of the debt owed to Forever Yours is $2,000.The value of the TV is estimated at $1,500.This means that Forever Yours:

A)is secured for the entire debt, $2,000.
B)is unsecured for $500, the excess of the debt over the value of the TV.
C)has a high priority claim of $500.This means that Forever Yours, Inc.will be allowed $500 worth of other unsecured property before other unsecured creditors get anything.
D)is unsecured for the entire debt.

Question 23

In the In Re Stern case,the court addressed the issue of discharge what type of debts under Chapter 7?

A)Child support.
B)Income taxes.
C)Student loan.
D)Fines owed to the government.

Question 24

Which of the following is NOT a requirement for an involuntary Chapter 7 bankruptcy petition?

A)The debtor must owe at least $50,000 in unsecured claims to the creditors who file.
B)The debtor must have at least two creditors join in the petition if the debtor has 10 or more creditors.If the debtor has fewer than 10 creditors, any single creditor or group can file a petition.
C)The debtor's debts must be secured.
D)None of the above is a requirement for an involuntary Chapter 7 bankruptcy petition.

Question 25

Which of the following would not be considered a fraudulent conveyance or a voidable preference under the provisions of the Code? Immediately prior to filing bankruptcy:

A)debtor sells assets well below fair market price to Freddie, a friend.
B)debtor sells his car at a public auction, thinking that it would bring a decent price, but the car brings an amount well below fair market value.
C)debtor's corporation transfers assets to stockholders in lieu of cash dividends.
D)debtor pays $650 to "Nation on Line" for the past ten months of Internet service.

Question 26

The correct order of payment of claims from the debtor's estate would be:

A)secured claims, priority claims, unsecured claims.
B)secured claims, unsecured claims, priority claims.
C)priority claims, secured claims, unsecured claims.
D)priority claims, unsecured claims, secured claims.

Question 27

Under what circumstances might the court reject a debtor's Chapter 13 plan?

A)The plan requires future earnings to pay off debts.
B)The plan promises to pay all secured and priority claims.
C)The plan anticipates paying the unsecured creditors less than what they would get under Chapter 7.
D)The plan treats all unsecured classes equally.

Question 28

Agnes plans to file for bankruptcy under Chapter 7.One month prior to filing,Agnes gives Joe's Filling Station $700 to apply to her gas bill.Joe has been so kind to let her charge the gas she needed for her car over the past year.The bankruptcy trustee appointed to the case:

A)can cancel the payment to Joe as a fraudulent transfer.
B)cannot cancel the payment to Joe because it is payment for an existing debt.
C)cannot cancel the payment to Joe because he is not an insider.
D)can cancel the payment to Joe as a voidable preference.

Question 29

According to the case In Re: John & Julie Hoffman,a court:

A)cannot approve a reaffirmation agreement under Chapter 7.
B)may void reaffirmation agreements under Chapter 13.
C)will approve a reaffirmation agreement provided there is proof that the debtor can make the required payments.
D)will approve a reaffirmation agreement if it is signed by a financial institution.

Question 30

Which of the following cannot file a bankruptcy petition under the Code?

A)Aztec, a foreign corporation doing business in the United States.
B)Milan, a citizen of Bosnia, who owns property in the United States.
C)Debra, a resident of Michigan, whose liabilities do not exceed assets.
D)Stan, an American citizen, who refuses to undergo credit counseling.
E)All of the above.

Question 31

Kylie filed a Chapter 7 bankruptcy petition in which she exempted her home,valued at $125,000.Kylie can exempt her entire home from all creditors if:

A)she claims her exemptions under the federal Bankruptcy Code.
B)she lives in a state that allows for an exemption amount of $125,000 or more.
C)she lives in a state that allows an exemption amount of $125,000 or more, she has lived in that state for at least two years prior to the bankruptcy, and there are no secured creditors with perfected liens against the home.
D)None of the above.

Question 32

Bill negligently ran his car into Philip,causing $50,000 in injuries.Bill was intoxicated at the time of the accident.Can Bill discharge this debt in bankruptcy?

A)Yes, claims based on negligence are dischargeable.
B)Yes, provided a court orders discharge.
C)No, such claims are not dischargeable in bankruptcy.
D)No, unless discharge is expressly requested in the petition.

Question 33

In the In Re Fox case,the court:

A)decided that Fox's plan of reorganization was not feasible.
B)imposed a cramdown.
C)refused to impose a cramdown.
D)refused to discharge Fox's income tax debt.

Question 34

Under the federal Bankruptcy Code,the exemption amount for the debtor's personal residence is:

A)$20,200.
B)$37,100.
C)unlimited.
D)$50,000.

Question 35

The bankruptcy designed for family farmers is:

A)Chapter 7.
B)Chapter 9.
C)Chapter 11.
D)Chapter 12.

Question 36

Which of the following statements concerning a Chapter 11 reorganization plan is true?

A)A reorganization plan will be confirmed by the court only if a majority of each class of creditors votes in favor of the plan.
B)A reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair.
C)Only the bankruptcy court has the authority to confirm or reject the reorganization plan.Creditors do not have a right to vote on the plan.
D)A reorganization plan binds only the debtor and not the creditors.

Question 37

A Chapter 7 debtor's agreement to pay a creditor on a debt after receiving a discharge in bankruptcy is called a:

A)voidable preference.
B)reaffirmation.
C)payment plan.
D)all of the above terms refer to the same concept.

Question 38

Ramona has received a discharge in bankruptcy,but wants to reaffirm a debt to her sister.To be valid,the reaffirmation:

A)will be scrutinized by the court to make sure her sister has not unfairly pressured Ramona.
B)will be automatically disallowed because allowing Ramona to promise to pay a discharged debt would be contrary to the goals of the bankruptcy proceedings.
C)will be automatically allowed if Ramona voluntarily chooses to make it.
D)must clearly disclose that Ramona has the right to rescind at any time since the debt was already discharged.

Question 39

Grand Lighting Co.has filed a petition for voluntary bankruptcy under Chapter 7 of the Code.The following property will be exempt from the bankruptcy process:

A)work tools.
B)up to three company cars.
C)up to $20,200 in the value of the company's real property.
D)All of the above.
E)None of the above.

Question 40

Kathleen filed for voluntary bankruptcy and the automatic stay went into effect.The automatic stay:

A)acts to automatically discharge Kathleen's debts.
B)stops any and all acts to collect, assess, or recover a claim against Kathleen that arose before she filed bankruptcy.
C)stops only secured creditors from taking any act to collect, assess, or recover a claim against Kathleen that arose before she filed bankruptcy.
D)stops creditors from trying to collect from Kathleen, but it does not stop them from filing lawsuits against her.

Question 41

What is a voidable preference? What requirements must be met in order for a preference to be voided?

Question 42

Karen has filed for bankruptcy.Who has the authority to confirm or reject a plan of payment,and what factors will be considered when deciding whether to approve a repayment plan under Chapter 13?

Question 43

When Dudley files his Chapter 7 petition,he lists the following debts:
a.$25,000 in back child support and alimony.
b.$15,000 for liabilities incurred after drinking and driving.
c.$10,000 for past-due student loans.
d.$5,000 for past-due rent to his landlord.
e.$550 for a past-due phone bill.
How will each of these debts be treated by the bankruptcy court.

Question 44

Artistic Framing,a business with $120,000 of unsecured debt,needs to file for bankruptcy,but wants to continue in business.Discuss what chapter of the Bankruptcy Code should be used,and discuss the effect of the 2005 amendment to the Code on the proceedings.

Question 45

What are the three main purposes of the federal Bankruptcy Code? How are these purposes supported and fostered in the Code?