Deck 30: Bankruptcy

Question 1

Bettina knows that she is going bankrupt.One month before the filing of her voluntary petition,Bettina sells a painting worth $50,000 to her brother for $100.This is legal under Chapter 7.However,if Bettina had simply given her brother $49,900,the transfer would have been voidable.

Answer 1

False
Explanation: If a debtor transfers property or incurs an obligation with intent to hinder,delay,or defraud creditors,the transfer is voidable by the trustee.Transfers of property for less than reasonable value are similarly voidable.

Question 2

Chapter 13 bankruptcy petitions may be either voluntary or involuntary.

Answer 2

False
Explanation: Chapter 13 proceedings are initiated only by the voluntary petition of a debtor filed in the Bankruptcy Court.

Question 3

Unless state law says otherwise,a bankrupt party may choose either the state's exemptions or the federal exemptions when deciding which property to exempt from bankruptcy.

Answer 3

True
Explanation: Under the Bankruptcy Code,the debtor may choose to keep certain items or property either exempted by state law or exempt under federal law unless state law specifically forbids use of the federal exemptions.

Question 4

Bob has not paid his ex-wife alimony as required under court order.His ex-wife is trying to collect the alimony Bob owes her.Bob files a bankruptcy petition.This automatically stays his ex-wife's collection efforts.

Question 5

A secured creditor is classified as an unsecured creditor,to the extent of the debt amount which exceeds the value of the collateral held by such secured creditor.

Question 6

The Bankruptcy Code is a part of state law.

Question 7

Chapter 13 of the Bankruptcy Code gives individuals an opportunity to pay their debts free of such problems as garnishments and attachments of their property by creditors.

Question 8

As per the 2005 amendments,the trustee of a bankruptcy estate has the authority to sell personally identifiable information to persons not affiliated to the debtor.

Question 9

Straight bankruptcy or liquidation is covered under Chapter 7 of the Bankruptcy Code.

Question 10

In order to prevent debtors from misusing the provisions of the Bankruptcy Code,the scope of dismissal of a bankruptcy petition has been widened to a broader interpretation of abuse,and not just restricted to substantial abuse.

Question 11

Bill's bicycle business has gone bust.The week before Bill went into bankruptcy,he paid $200 for a used bicycle that he intended to re-sell for a profit.This $200 payment is a preference under Chapter 7.

Question 12

Chapter 12 is available only for family farmers and fishermen with regular income.

Question 13

Chapter 14 of the Bankruptcy Code allows for special protections for family farmers.

Question 14

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has retrospective application and even applies to cases filed before 17^th October 2005.

Question 15

The priority claims to a Bankruptcy Estate are pain after the secured claims but before the unsecured claims.

Question 16

One of the kinds of property that is exempt from bankruptcy under Chapter 7's federal exemptions is one's interest (not to exceed $3,675 in value)in one motor vehicle.

Question 17

A bankrupt person who conceals property in order to hinder,delay,or defraud creditors loses any discharge that he may have had regarding that property,but his other debts still are dischargeable.

Question 18

Dave,who is in financial trouble,has ten creditors.An involuntary bankruptcy petition against Dave requires that three of these creditors sign.

Question 19

As per the provisions relating to reaffirmation agreements,the Court can under special circumstances order the debtor to become party to the reaffirmation agreement.

Question 20

Creditors wishing to obtain funds from a bankruptcy must typically file proof of a claim with the estate within a certain time.

Question 21

Abe and Hanna are husband and wife.They have filed for Chapter 7 Bankruptcy.However,they cannot agree on which set of property exemptions they want to use.Abe wants to use the federal set of exemptions,but Hanna wants to use the set of Michigan,where they have lived for 10 years.Under these circumstances:

A) the federal exemptions will apply to this bankruptcy proceeding.
B) the Michigan exemptions will apply to this bankruptcy proceeding.
C) the federal exemptions will apply to Abe's property and the Michigan exemptions will apply to Hanna's property.
D) the bankruptcy court will decide which set of exemptions to apply here.

Question 22

The filing of a bankruptcy petition operates as a(n):

A) exemption of certain items of property.
B) discharge,relieving the bankrupt person of further responsibility for dischargeable debts,giving him/her a fresh start.
C) automatic stay,holding in abeyance various forms of creditor action against a debtor or his/her property.
D) redemption of exempt personal property from secured creditors by paying them the full value of the collateral at the time the property is redeemed.

Question 23

Which of the following items of a debtor's property are exempt from sale in a bankruptcy proceeding under the federal set of exemptions?

A) Life insurance contracts valued at $10,000.
B) Real or personal property valued at $50,000.
C) Jewelry whose value exceeds $10,000.
D) Individual retirement account exceeding $1 million.

Question 24

If a petition for bankruptcy is filed by a health care business:

A) the creditors bear the financial responsibility for the disposal of patient records where there are insufficient funds to continue to store them.
B) the trustee is instructed to transfer patients in a health care business that is in the process of being closed to an appropriate health care business.
C) the necessary costs of closing a health care business is borne by the adjudicating court.
D) the automatic stay provisions apply to actions by the Secretary of Health and Human Services to exclude the debtor from participating in federal health care programs.

Question 25

According to the 2005 revisions of the Bankruptcy Code:

A) any eviction proceedings in which the landlord obtained a judgment of possession prior to the filing of the bankruptcy petition can be continued.
B) any eviction proceedings in which the landlord obtained a judgment of abandonment prior to the filing of the bankruptcy petition can be continued.
C) any eviction proceedings in which the landlord obtained a judgment of defeasance prior to the filing of the bankruptcy petition can be continued.
D) any eviction proceedings in which the landlord obtained a judgment of vicarious liability prior to the filing of the bankruptcy petition can be continued.

Question 26

Which of the following fits within one of the exceptions to the Bankruptcy Act's preference provision?

A) A perfected Article 9 security interest.
B) A transfer to an insider of the debtor.
C) A transfer made in the ordinary course of the debtor's business.
D) A consumer's transfer of less than $2.000 to a creditor who has sold her consumer goods.

Question 27

An involuntary bankruptcy petition can be filed against:

A) banking corporations.
B) multinational companies.
C) agricultural corporations.
D) nonprofit organizations.

Question 28

_____ refers to securing exempt personal property from secured creditors by paying them the full value of the collateral at the time the property is redeemed.

A) Automatic stay
B) Discharge
C) Exemption
D) Redemption

Question 29

Insolvency occurs when a debtor:

A) is unable to pay his/her debts as they become due.
B) has a larger number of unsecured creditors than secured creditors.
C) is unemployed for two consecutive years.
D) is declared bankrupt by a Certified Accountant.

Question 30

A bankruptcy petition under Chapter 7:

A) can only be filed by the debtor.
B) can only be filed by the debtor's creditors.
C) can only be filed by the trustee.
D) can be filed either by the debtor or his creditors.

Question 31

A voluntary petition under Chapter 7:

A) cannot be filed by an insurance corporation.
B) requires that the debtor's debts exceed his assets by $5,000.
C) requires that the debtor have at least three creditors.
D) cannot be made by an individual.

Question 32

According to the 2005 revisions of the Bankruptcy Code individual debtors must file,along with their schedules of assets and liabilities:

A) copies of all payment advices and other evidence of payments they have received from any employer within 30 days before the filing of the petition.
B) a statement of the amount of gross yearly income,itemized to show how the amount is calculated.
C) a certificate from the Clerk of the Bankruptcy Court that they must receive credit counseling to be eligible for relief.
D) a statement showing any anticipated increase in income or expenditures over the 24-month period following the date of filing the petition.

Question 33

An individual is barred under federal law from filing for bankruptcy twice within a 4-year period.

Question 34

What Chapter of the Bankruptcy Code covers liquidation?

A) Chapter 7
B) Chapter 13
C) Chapter 5
D) Chapter 11

Question 35

Under the Bankruptcy Act's exemption provisions:

A) the debtor must choose either the state or the federal exemption scheme.
B) the full value of one's motor vehicle is exempt.
C) federal exemptions defeat state exemptions in case of a clash between them.
D) state exemption laws that exceed the federal limits (i.e. ,that are too generous)are void.

Question 36

An absolute $136,875 homestead cap applies if:

A) the debtor's aggregate interest exceeds $1,450 in value in jewellery held primarily for the personal,family,or household use of the debtor.
B) retirement funds that are in a fund or account are exempt from taxation under the Internal Revenue Code.
C) the debtor's interest exceeds $136,875 in value in real or personal property.
D) the bankruptcy court determines that the debtor has been convicted of a felony.

Question 37

The Bankruptcy Act of 2005 increases the responsibility of a debtor's attorneys thereby raising concerns that bankruptcy practice may become less attractive as:

A) the attorney has to operate on relatively thin margins as provisions increase along with costs and risks.
B) the attorney owes a duty to client for getting the debtor's property appraised.
C) the attorney has to call a meeting of all the creditors of the debtor.
D) the attorney has to classify the priority of creditors as per the 10 classes of priority given in the Bankruptcy Code.

Question 38

The debtor is also permitted to void _____ liens against exempt properties that impair her exemptions.

A) medical
B) tax
C) attorney
D) judicial

Question 39

The 2005 revisions of the Bankruptcy Code makes it the responsibility of the _____ to determine that a pleading of insolvency is well grounded in fact and is either warranted by existing law or is based on a good faith argument for extending existing law.

A) attorney
B) debtor
C) creditor
D) court

Question 40

Under the Bankruptcy Code a debtor:

A) must elect to use either the set of exemptions provided by the state or the set provided by the federal bankruptcy law.
B) must honor the instructions of the adjudicating court with regard to the set of exemptions that he should take.
C) must accept the decision of the creditors with regard to the exemptions to be taken so as to not jeopardize their chances of recovery.
D) may pick and choose between them the set of exemptions provided by the state or the set provided by the federal bankruptcy law.

Question 41

Which of the following transfers would be considered fraudulent under the 2005 revisions of the Bankruptcy Code?

A) Transfers that are intended by the debtor and creditor to be a contemporaneous exchange for new value.
B) Transfers that led to the creation of a security interest in new property where new value was given by the secured party to enable the debtor to obtain the property.
C) Transfers made in payment of a debt incurred in the ordinary course of the business of the debtor and the transferee.
D) Transfers to or for the benefit of an insider under an employment contract and not in the ordinary course of business.

Question 42

A plan is considered to be fair and equitable to a class of impaired claimants with unsecured claims if the reorganization plan:

A) provides for the sale of any property subject to liens securing such claims free and clear of such liens with the liens to attach to the proceeds of the sale.
B) provides for the realization by the holders of the "indubitable equivalent" of such claims.
C) provides that each holder of a claim will receive or retain on account of the claim property of a value equal to the allowed amount of such claim.
D) provides the holder of any interest that is junior to the interests of such class will not receive any property on account of such junior claim.

Question 43

Debtors have to file a statement of their calculations under the _____ as part of their schedule of current income and expenditures.

A) limiting test
B) Fizeau test
C) means test
D) Sagnac test

Question 44

In a Chapter 7 liquidation proceeding,the claims of creditors are paid in which of the following order?

A) Priority claims take precedence over claims made by secured and unsecured creditors.
B) The claims of secured creditors are satisfied first,followed by priority claims,and lastly claims made by unsecured creditors.
C) Older claims are given priority over more recent claims.
D) Claims of secured creditor are satisfied first,followed by unsecured creditors,and lastly priority claims.

Question 45

Selena pays back a $2,000 loan from her parents within one year before she files the bankruptcy petition.This is an example of:

A) anticipatory breach.
B) a secured transaction.
C) preferential payment.
D) a failure of consideration.

Question 46

A creditor might try to obtain an advantage over other creditors by obtaining a(n)_____ on the debtor's property to secure an existing debt.

A) surety
B) preferential lien
C) presentment
D) equity of redemption

Question 47

_____ refers to the agreement between the debtors and the creditors wherein creditors put pressure on debtors to pay,debts that have been discharged in bankruptcy.

A) Reaffirmation agreement
B) Miranda warning
C) Blank endorsement
D) Buy-sell agreement

Question 48

If there are insufficient funds to satisfy all the creditors within a class:

A) the debtors have the last say on the amount that each member shall receive.
B) the class members decide amongst themselves the amount that each of the members should receive.
C) the court makes an arbitrary decision regarding the share of each member.
D) each class member receives a pro rata share of his claim.

Question 49

Under Chapter 12 of the Bankruptcy Act:

A) only farms with an aggregate debt exceeding $5 million are covered.
B) the debtor must cease to operate the farm.
C) no trustee is appointed.
D) the debtor is usually permitted to remain in possession to operate the farm.

Question 50

Under the Bankruptcy Code a judge is allowed to reduce the debt of an unsecured consumer creditor by what percentage?

A) 20%
B) 30%
C) 50%
D) 75%

Question 51

_____ refers to a situation wherein the court forces dissenting creditors to accept a reorganization plan when the court finds that it is fair and equitable.

A) Cram down
B) Make one whole
C) Divestiture
D) Restitution

Question 52

In a reorganization petition under Chapter 11 of the Bankruptcy Code,if any particular class of creditors rejects the reorganization plan,the Court will:

A) disallow the claims of the rejecting creditors.
B) force the trustee to renegotiate with the rejecting creditors so that a compromise maybe reached at.
C) order the debtor to file bankruptcy under Chapter 13.
D) force the rejecting creditors to accept the reorganization plan,if the plan is fair and equitable towards the rejecting creditors.

Question 53

In order to safeguard the debtor from reaffirmation agreements the Court:

A) allows the debtor to rescind the reaffirmation agreement within a period of 60 days.
B) is empowered to declare all reaffirmation agreements as void.
C) may order the creditor to demand only 50 percent of the original debt amount.
D) may allow a reaffirmation agreement only if the debtor is represented by an attorney.

Question 54

Under Chapter 7,a debtor is denied discharge of all debts when:

A) the debtor has transferred property in order to defraud creditors.
B) the debtor has unpaid tax liabilities.
C) the debtor has made a preferential transfer to a creditor.
D) the debtor has made a fraudulent transfer.

Question 55

Fanny and her husband Fred own a farm in Iowa.Unfortunately,after earning a $50,000 income on the farming operation and $10,000 in non-related endeavors in 2002,Fanny and Fred accumulated $100,000 in farm-related debt.Their only other debt is a $10,000 on a truck purchased in 2001.Fanny and Fred want to file for a Chapter 12 plan.Which of the following statements is most accurate?

A) Fanny and Fred do not qualify for protection under a Chapter 12 plan.
B) Fanny and Fred will not be able to remain in possession of their farm under the plan.
C) A trustee will be allowed to sell unnecessary assets such as equipment.
D) A trustee will not be appointed under the plan.

Question 56

Which of the following is true regarding reorganizations under Chapter 11?

A) Only corporations are eligible for Chapter 11.
B) Chapter 11 proceedings are voluntary only.
C) No trustee can be appointed.
D) The court must confirm any reorganization plan approved by the creditors.

Question 57

Unsecured creditors,to the extent that the Bankruptcy estate is solvent,share in proportion to what?

A) Amount paid in legal fees
B) Claims against the debtor
C) Based on size of the creditors
D) Based on the geographic locations of creditors

Question 58

To which of the following is Chapter 11 not available?

A) Manufacturing corporations
B) A sole proprietorship that sells used cars
C) A bank
D) A natural person

Question 59

An individual will not be granted a discharge,if such discharge has been granted to the individual within the previous:

A) five years.
B) six years.
C) seven years.
D) eight years.

Question 60

The means test is designed to determine the:

A) debtor's ability to repay general unsecured claims.
B) creditor's ability to recover unpaid claims from the debtor.
C) court's ability to guarantee exemptions for the debtor.
D) government's ability to bar corporations from availing the provision of discharge of debts.

Question 61

Ajax has accumulated debts which the company is unable to pay.The company has four creditors who hold security provided by Ajax and are valued as follows: Ace ($6,000),Crest ($3,000),Maxton ($8,000)and Interon ($9,000).Which of these creditors will be able to successfully file a petition for involuntary bankruptcy for Ajax?

Question 62

Dave owes $100,000 to Cindy and $100,000 to Connie.Both before and after Dave went into bankruptcy under Chapter 7,he engaged in faking records,withholding information,and concealing assets in order to avoid Cindy's debt.However,Dave did not behave this way with regard to Connie's debt.Because Dave had few assets and Connie's debt was unsecured,she got virtually nothing out of Dave's bankruptcy.The same is true regarding Cindy.Sometime later,therefore,Cindy and Connie sued Dave on the debt,once Dave becomes rich.Dave defends by saying that both debts are discharged.Is Dave right? Assume that each debt is a normal contract obligation.

Question 63

A Chapter 13 debtor must begin making the instalment payments proposed in her plan:

A) within 30 days after the plan is filed.
B) one week after the plan is approved by the creditors.
C) within 60 days after the plan is approved by the court.
D) within one week of the formal submission to the trustee.

Question 64

A Chapter 13 of the Bankruptcy Code provides an advantage to the debtor by which:

A) the debtor is not obligated to reveal all his assets.
B) unsecured creditors are not recognized as valid creditors.
C) the debtor can avoid the stigma of bankruptcy by getting an opportunity to pay the debts in installments under the protection of a federal court.
D) the court does not appoint a trustee,as it relies on the good faith of the debtor for the settlement of all debts.

Question 65

Describe the different approaches taken to transnational insolvencies.What is the approach taken currently?

Question 66

The Ace Corporation is involuntarily petitioned into a Chapter 7 bankruptcy on March 1,1994.On January 10,1994,Ace paid the Highstate Gas Company its $1,700 utility bill for natural gas supplied during December of 1993.Is this payment preferential? Why or why not?

Question 67

Under Chapter 13 of the Bankruptcy Act:

A) the petition may be voluntary or involuntary.
B) no debt extensions are permitted.
C) no plan may be approved if an unsecured creditor objects.
D) no trustee is appointed.

Question 68

Under which of the following can a bankruptcy petition be initiated only by a voluntary petition?

A) Chapter 7
B) Chapter 11
C) Chapter 13
D) Chapter 15

Question 69

Joe goes into bankruptcy under Chapter 7 and in due course all of his debts are discharged thereby.After the discharge is granted,Joe signs an agreement promising to repay one of those discharged debts.Joe's attorney certifies that Joe is able to pay the debt.Is Joe bound to pay this debt?

Question 70

What Chapter of the bankruptcy code is liquidation for businesses?

A) Chapter 12
B) Chapter 11
C) Chapter 15
D) Chapter 7