Deck 39: Bankruptcy

Question 1

Federal district courts may hear all matters collateral to the bankruptcy, even if these matters are not normally permitted to be brought in federal court.

Answer 1

False

Question 2

The doctrine of subordination of claims might result in two unsecured creditors getting unequal proportions of their debts paid.

Answer 2

True

Question 3

An automatic stay would not prevent a creditor from creating a lien against the debtor's property.

Answer 3

False

Question 4

The court has the sole right to accept or reject a proposed plan of reorganization under Chapter 11.

Question 5

The various chapters of the Bankruptcy Code are the only options for resolving the conflict between creditor rights and debtor relief.

Question 6

More than 99 percent of all bankruptcy petitions are filed voluntarily.

Question 7

Bill has loaned Mark $500, which Mark agreed to repay on January 15, 2010.If Mark files a voluntary petition of bankruptcy on August 1, 2009, Bill has a claim as a creditor.

Question 8

According to the 1994 amendments to the Bankruptcy Act, the U.S.Judicial Conference must adjust for inflation the dollar amounts of the requirements for filing involuntary cases, priorities, and exemptions every seven years.

Question 9

Under Chapter 11, a class that is not impaired under a plan is deemed to have accepted the plan.

Question 10

The Bankruptcy Code grants to U.S.District Courts original and exclusive jurisdiction over all bankruptcy cases.

Question 11

In a Chapter 7 proceeding, an unsecured creditor who files a claim with the court after the deadline because he is too busy planning and going on a vacation would be unable to collect anything.

Question 12

A fraudulent transfer made more than one year prior to filing cannot be avoided by the trustee.

Question 13

The 1994 amendments allow the creditors to elect a trustee in a Chapter 11 proceeding if the court orders the appointment of a trustee for cause.

Question 14

A bankruptcy petition may be filed by one creditor of a debtor as long as the debtor owes him more than $13,475 in unsecured claims.

Question 15

Within each federal district court is established a bankruptcy court staffed by bankruptcy judges.

Question 16

A debt is an obligation to pay money owed by a debtor to a creditor.

Question 17

The court must confirm a plan of reorganization before it is binding on the parties.

Question 18

A trustee in bankruptcy may sell the property of the debtor's estate.

Question 19

Any person who may be a debtor under Chapter 7, except a stockbroker or a commodity broker but including railroads, may be a debtor under Chapter 11.

Question 20

Chapter 7 applies to all debtors, with the exception of railroads, insurance companies, banks, savings and loan associations, homestead associations, and credit unions.

Question 21

Under exemptions in the Bankruptcy Code, a debtor may keep both $20,200 in equity in a residence and $3,225 in equity in a motor vehicle.

Question 22

The Bankruptcy Code defines a creditor as an entity having a claim against the debtor that arose at the time of or before the order for relief.

Question 23

If the debtor contests the involuntary petition for bankruptcy, the court must enter an order for relief against the debtor.

Question 24

Clifton and Dee earn 80 percent of their gross income from farming and have debts of $750,000 (90 percent of their total debt) from their farming operation.If they want to file a voluntary bankruptcy, Chapter 12 of the Bankruptcy Code will not apply to them.

Question 25

A writ of execution is issued after a judgment against the debtor is entered in court.

Question 26

In an assignment for the benefit of creditors, if each creditor is paid a pro rata share of his original obligation, the debtor is then discharged from any further obligation to the creditor.

Question 27

Within 30 days after relief is ordered, a meeting of creditors must be held, at which the debtor must submit to examination by creditors and the court.

Question 28

The 2005 Act added a requirement for individual debtors to receive credit counseling within 180 days before filing a bankruptcy petition.

Question 29

A composition would bind all of debtor's creditors to the settlement.

Question 30

Garnishment is only a post-judgment remedy.

Question 31

A debtor who files for bankruptcy can keep up to $1,350 in jewelry and all social security, veteran's and disability benefits under the exemptions found in the Bankruptcy Code.

Question 32

A receiver is a disinterested person appointed at the discretion of the court to manage, liquidate, and conserve assets of a debtor.

Question 33

Chapter 3 of the Bankruptcy Code contains provisions dealing with the commencement of a case in bankruptcy.

Question 34

A trustee under a Chapter 11 or 13 proceeding performs the same duties as a Chapter 7 trustee.

Question 35

A composition of creditors is a bankruptcy form of relief under Chapter 13 of the Bankruptcy Code.

Question 36

Most student loans cannot be discharged under Chapter 13.

Question 37

While certain debts of an individual are not dischargeable under Chapters 7, 11, and 12, all debts are dischargeable under Chapter 13's "hardship discharge" provisions.

Question 38

An employee of a bankrupt company could be able to receive up to $10,950 in unpaid wages and up to $10,950 in contributions to employee benefit plans, for a total of $21,900 before any money is paid to a consumer to compensate for deposits paid to the company for goods which were never delivered because of the company's going bankrupt.

Question 39

Miriam files for bankruptcy on March 18.On August 14 she receives $10,000 as beneficiary of a life insurance policy.This $10,000 will not be included in her bankruptcy estate.

Question 40

Alimony and support payments owed to the debtor who files bankruptcy are part of the bankruptcy estate that can be distributed to the debtor's creditors for the payment of allowed claims filed with the bankruptcy court.

Question 41

The debtor may convert a Chapter 7 bankruptcy case to a Chapter 11 or 13 case; however, a waiver of this right is enforceable.

Question 42

In March, Margaret made a loan to Pete for $10,000.Three months later, she began to hear rumors about Pete's failing financial condition.When in late July, Pete asked her to loan him an additional $2,000 to buy inventory, Margaret required a security interest in the inventory and also demanded that Pete secure the first loan with his personal automobile.In September, Pete filed bankruptcy.Will these security interests stand up?

A)Yes, if they are properly filed.
B)Yes, since they are for antecedent debts.
C)No, both will be voidable preferences.
D)No, the security interest in the automobile would be a voidable preference.

Question 43

All but which one of the following would be exempt from bankruptcy under the federal law?

A)$500 received in child support.
B)A $300 cocktail ring.
C)A $200 cashmere sweater.
D)A $10,000 truck.

Question 44

An involuntary bankruptcy petition, even if contested by the debtor, may still result in an "order for relief" if:

A)the debtor generally is not paying his admitted debts as they come due.
B)the debtor failed to pay three or more debtors whose total debts equal $5,000.
C)a custodian was appointed within 120 days before the filing of the petition.
D)Both (a) and (c).

Question 45

The bankruptcy definition of "insolvency" is a financial condition such that the sum of one's debts exceeds the sum of all one's property at fair valuation.

Question 46

Monica's husband is an accountant who keeps the books for her business.When the business goes bankrupt, will Monica's husband's claim for services be allowed by the bankruptcy courts?

A)No, since he is an insider.
B)No, because it would be difficult to prove that services were actually rendered.
C)Yes, but only up to the reasonable value.
D)Yes, as long as he is not an officer of the corporation.

Question 47

A statutory lien arises solely by force of statute and includes a security interest and a judicial lien.

Question 48

Any person eligible to be a debtor under a given bankruptcy proceeding may file a voluntary petition and must be insolvent to do so.

Question 49

A Chapter 13 plan may be modified after confirmation only at the request of the debtor.

Question 50

Edith files a Chapter 7 petition in bankruptcy.She owns the following property: (1) an automobile valued at $1,000; (2) a homestead valued at $75,000, on which First Bank holds a mortgage of $60,000; (3) personal jewelry valued at $1,100; and (4) monthly disability payments of $1,000.Assuming Edith elects to use the exemptions listed in the Bankruptcy Code, what property may Edith keep?

A)The disability payments only.
B)The disability payments and the homestead only.
C)The disability payments plus the automobile, the homestead, and the jewelry.
D)Nothing.She must sell all of her assets and have the proceeds distributed to the creditors, and she must turn the disability payments over to the trustee.

Question 51

If the debtor is an individual whose debts are primarily consumer debts, the trustee may not avoid any transfer, within 90 days of bankruptcy, of property valued at less than $600.

Question 52

John's brother, Phil, loaned him $10,000 to start his business.John didn't do too well and planned to file for bankruptcy.In May, he gave Phil his car worth $8,000 to satisfy the debt.John filed his petition in November.After liquidation, if the car were included in his assets, every unsecured debtor would have received 85% of the debt owing to him.Will this be a voidable preference?

A)Yes, since Phil is an insider.
B)No, because the transfer was made more than 90 days prior to filing.
C)Yes, because the transfer was made for an antecedent debt.
D)No, because Phil did not receive preferential treatment over other creditors.

Question 53

Ken loaned Barbara $8,000 and took in return a note secured by Barbara's car.If Barbara files for bankruptcy when the value of the car is $4,500, what is Ken's status? He has a (n):

A)secured claim for $4,500.
B)unsecured claim for $8,000.
C)unsecured claim for $4,500.
D)secured claim for $8,000.

Question 54

Under the UCC and the Bankruptcy Code, the bankruptcy trustee has priority over a creditor with a security interest that was not perfected at the time the bankruptcy petition was filed.

Question 55

An involuntary petition for bankruptcy can be filed against a:

A)non-profit charitable organization.
B)partnership that invests in real estate.
C)life insurance company.
D)wheat farmer.

Question 56

In a Chapter 11 or 13 proceeding, the bankruptcy estate of an individual includes wages earned after commencement of the proceeding.

Question 57

Which of the following debts would be discharged in bankruptcy?

A)Consumer credit loans for a stove.
B)Property taxes on a beach house.
C)Student loans maturing one-year prior to bankruptcy filing.
D)Alimony payments past due.

Question 58

Discharge relieves the debtor in bankruptcy from liability for all of his debts.

Question 59

The estate of a debtor includes wages earned after commencement of a Chapter 7 liquidation proceeding.

Question 60

All but which one of the following is a purpose of bankruptcy legislation?

A)To preserve existing business relations.
B)To punish recalcitrant debtors.
C)To bring about a quick, equitable distribution of the debtor's property among creditors.
D)To allow rehabilitation of debtors.

Question 61

The Bankruptcy Code grants to U.S.District Courts:

A)original and exclusive jurisdiction over all bankruptcy cases.
B)original, but not exclusive, jurisdiction over civil proceedings arising under bankruptcy cases.
C)exclusive jurisdiction over all the debtor's property.
D)All of the above.

Question 62

If Abe has an allowed claim of $5,000 against the estate of Deborah and has a security interest in her art collection in the amount of $3,000 of the $5,000 claim:

A)Abe will recover nothing in the bankruptcy proceeding.
B)Abe will recover $5,000 in the bankruptcy proceeding.
C)Abe has a secured claim in the amount of $3,000 and an unsecured claim in the amount of $2,000.
D)it would be a voidable preference to pay Abe the full $5,000.

Question 63

Under Chapter 7, the court will not grant the debtor a discharge if:

A)the debtor is not an individual.
B)the debtor has destroyed, concealed, or failed to keep records.
C)the debtor has transferred, removed, or concealed any of his property with intent to defraud his creditors within 12 months before the filing of the bankruptcy petition.
D)All of the above.

Question 64

The court will not allow any claim that:

A)is unenforceable against the debtor or her property.
B)is for unmatured interest.
C)may be offset against a debt owing the debtor.
D)is for insider or attorney services in excess of the reasonable value of such services.
E)All of the above.

Question 65

United States trustees:

A)are government officials appointed by the U.S.Attorney General.
B)have administrative responsibilities in bankruptcy cases in almost all of the districts.
C)select bankruptcy trustees.
D)are the same as bankruptcy trustees.
E)Choices (a), (b), and (c) are correct.

Question 66

Under the Bankruptcy Act, the debtor must file a list of:

A)creditors.
B)all property the debtor owns.
C)current expenditures.
D)All of the above.

Question 67

Voidable preferences include all of the following EXCEPT:

A)a transfer of property of the debtor to or for the benefit of a creditor.
B)payment of taxes owed to a governmental unit.
C)a transfer of property while the debtor was insolvent.
D)a transfer that enables a creditor to receive more than he would have received under Chapter 7.

Question 68

All of the following are dischargeable in bankruptcy EXCEPT:

A)an unsecured note to a bank.
B)a car loan.
C)domestic support obligations arising from divorce or separation proceedings.
D)a court judgment against the debtor.

Question 69

Which of the following debts are dischargeable in a Chapter 7 bankruptcy proceeding?

A)A $10,000 judgment that has not yet been executed.
B)Medical expenses of $25,000.
C)Credit card debts of $15,000 from two years ago.
D)All of the above are dischargeable.
E)None of the above are dischargeable.

Question 70

Which chapter of the Bankruptcy Act allows for the adjustment of debts of an individual with regular income?

A)Chapter 7.
B)Chapter 11.
C)Chapter 12.
D)Chapter 13.

Question 71

A plan of reorganization under Chapter 13 will be confirmed when the:

A)debtor has not been discharged before.
B)unsecured creditors are not discharged.
C)unsecured creditors receive the same amount as the secured creditors.
D)unsecured creditors receive at least as much as they would have if the debtor had liquidated.

Question 72

Pre-judgment attachment permits a creditor to seize the debtor's property:

A)to prevent the debtor from disposing of assets before litigation would result in a judgment for the creditor.
B)if the defendant has not paid his debts on time.
C)when the defendant has filed for bankruptcy.
D)if the defendant cannot be persuaded to come to court.

Question 73

A private employer:

A)may terminate the employment of an individual solely because he has been a debtor in bankruptcy.
B)may not discriminate with regard to employment solely because an individual was insolvent before the commencement of a bankruptcy case.
C)has no restrictions regarding employment practices involving individuals who are or have been debtors under the Bankruptcy Code.
D)may discriminate with respect to employment against an individual who has not paid a debt that is dischargeable in a case under the Bankruptcy Code.

Question 74

A Chapter 13 plan of reorganization may include all but which one of the following?

A)Priority debts must be paid in full unless the debtor waives that right.
B)Future wages necessary to execute the plan must be controlled by the trustee.
C)Assets must be liquidated.
D)The rights of unsecured creditors may be modified.

Question 75

Margaret has $3,200 cash after selling off her television, stereo, and personal computer.She has debts of $4,800 owing to the following creditors: Anna - $900
Bob's Shop - $1500
Hyatt's - $2100
Jones - $300
If they all agree to a composition agreement, how much will Hyatt's be able to collect?

A)$2,100.
B)$1,400.
C)$700.
D)$1,050.

Question 76

One type of fraudulent transfer consists of the:

A)distribution of the debtor's property among creditors.
B)debtor's transferring property with actual intent to hinder her creditors.
C)avoidance of statutory liens when debtor becomes insolvent.
D)discharge of debts of unsecured tardy creditors.

Question 77

A plan for reorganization under Chapter 11 does not have to meet which of the following requirements to be confirmed by the court?

A)Good faith.
B)Feasibility.
C)Be accepted by all creditors.
D)Cash payments for certain classes of creditors.

Question 78

A trustee in bankruptcy may avoid which of the following?

A)Fraudulent transfers.
B)Voidable preferences.
C)Automatic stays.
D)Both fraudulent transfers and voidable preferences.

Question 79

An ordinary contract between the debtor and his creditors whereby the creditors receive pro rata a part of their claims and the debtor is discharged from the balance of the claims is:

A)a non-statutory composition.
B)a statutory assignment.
C)an equity receivership.
D)an automatic stay.

Question 80

Which chapter of the Bankruptcy Code covers transnational insolvencies?

A)Chapter 9.
B)Chapter 12.
C)Chapter 15.
D)None of the chapters.The U.S.Bankruptcy Code deals only with bankruptcies within U.S.borders.