Deck 26: Bankruptcy

Question 1

A debtor need not be insolvent to file for bankruptcy relief.

Answer 1

True

Question 2

An involuntary bankruptcy occurs when a debtor's creditors are forced to accept a discharge of the debtor's debts.

Answer 2

False

Question 3

A debtor wishing to file for bankruptcy must complete the means test to determine whether he or she qualifies.

Answer 3

True

Question 4

Bankruptcy law has one goal-to provide relief and protection for creditors who have "given too much credit."

Question 5

A trustee has the power to set aside a sale of the debtor's property.

Question 6

Bankruptcy proceedings focus on the procedures to administer a debtor's estate in bankruptcy.

Question 7

Bankruptcy proceedings are held in state courts.

Question 8

Any "person" may be a debtor in a liquidation proceeding.

Question 9

Before a discharge is granted,a debtor can transfer property or make a payment in preference to one creditor over another.

Question 10

If the assets in a debtor's estate in bankruptcy are insufficient to pay fully all creditors,the debtor is liable for the difference.

Question 11

Any creditor listed in the schedules filed by the debtor must file a proof of claim.

Question 12

In some circumstances,a bankruptcy court can conduct a jury trial.

Question 13

A bankruptcy estate consists of all the debtor's interests in property currently held,wherever located.

Question 14

All student loans are dischargeable in bankruptcy.

Question 15

If a debtor's income is below the median income,there is a presumption of bankruptcy abuse.

Question 16

A trustee must call a meeting of the creditors listed in the schedules filed by the debtor.

Question 17

Bankruptcy law has one goal-to encourage the continued use of credit

Question 18

In the distribution of the debtor's estate,secured creditors take priority over unsecured creditors.

Question 19

To falsify information on official bankruptcy schedules is a crime.

Question 20

Before filing for bankruptcy,a consumer-debtor must receive credit counseling.

Question 21

Nika operates a sole proprietorship,a corporation,and a partnership.Nika wants to obtain relief for her individual debts and the debts of her corporation and partnership.For each of these,Nika may file a petition in bankruptcy for relief through

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)a family-farmer bankruptcy plan.

Question 22

An agreement to pay a debt discharged in bankruptcy is called a workout.

Question 23

A bankruptcy court may deny a discharge based on the debtor's conduct.

Question 24

Certain liquidation cases may be converted to repayment plan cases with the consent of the debtor.

Question 25

One of the primary effects of a discharge is to relieve the liability of a co-debtor.

Question 26

The procedure for filing a family-farmer bankruptcy plan is very similar to the procedure for filing a repayment plan.

Question 27

An individual's repayment plan under Chapter 13 can be initiated only by the debtor's filing of a voluntary petition.

Question 28

A reorganization plain is a plan to conserve and administer the debtor's assets in the hope that all of the creditors will eventually be paid in full.

Question 29

Discharge of a debt is never denied because of the nature of a claim.

Question 30

Mikhail files a petition in bankruptcy.One of the goals of bankruptcy law with respect to a debtor who has "gotten in over his head" is to

A)encourage the continued use of credit to borrow funds.
B)ensure that co-debtors will continue to guarantee loans.
C)provide relief and protection.
D)shield assets from creditors.

Question 31

Certain debts are not dischargeable in bankruptcy.

Question 32

On the entry of an order for relief in a reorganization case,the creditors generally take over the operation of the debtor's business.

Question 33

In a reorganization,a debtor pays a portion of the debts,is discharged of the rest,and is allowed to continue in business.

Question 34

For individual debtors,the plan in a reorganization case must be completed before discharge will be granted.

Question 35

Delilah files a petition in bankruptcy.The proceeding is governed by the Bankruptcy Code,which is part of

A)state law.
B)federal law.
C)the U.S.Constitution.
D)international law.

Question 36

Certain debtors may not qualify to have all debts discharged in bankruptcy.

Question 37

Mabel files a petition in bankruptcy.The initial proceeding on this petition will be in

A)a federal bankruptcy court.
B)a state bankruptcy court.
C)the highest court in the state in which Mabel lives.
D)the United States Supreme Court.

Question 38

Nero files a petition in bankruptcy.The proceeding is governed by the Bankruptcy Code,which is encompassed by

A)Article 3 of the Uniform Commercial Code.
B)Chapter 5 of the Federal Register.
C)Section 7 of the appropriate state statute.
D)Title 11 of the United States Code.

Question 39

If,within a certain time after a discharge,it is discovered that a debtor concealed property to defraud a creditor,the discharge may be revoked.

Question 40

Before obtaining a discharge in bankruptcy,a consumer-debtor must attend a consumer education course (unless such a course is unavailable).

Question 41

Elise goes through an involuntary bankruptcy proceeding.An involuntary bankruptcy occurs when

A)creditors are forced to accept a discharge of a debtor's debts.
B)a debtor is unable to pay his or her debts as they come due.
C)a debtor's creditors force the debtor into bankruptcy proceedings.
D)a debtor's debts exceed the fair market value of his or her assets.

Question 42

Lorissa files a petition for bankruptcy.Lorissa's creditors must file with the court their proof of claims against Lorissa's assets within

A)fifteen days of the order for relief.
B)thirty days of the filing of the petition.
C)sixty days of the automatic stay.
D)ninety days of the creditors' meeting.

Question 43

A petition for a discharge in bankruptcy under Chapter 7 may be filed by

A)Employees Credit Union,a corporation.
B)Federal Savings & Loan Association,a corporation.
C)Goodhands Insurance Company,a corporation.
D)Huey,an independent financial adviser.

Question 44

Debtors who are not eligible for relief under Chapter 11 include

A)Kasey,a sole proprietor who operates Luscious Donut Shop.
B)MiniParks Associates,a partnership that operates a chain of miniature golf courses.
C)Neighborly Plumbers,Inc.,a corporation that does not own real estate and has less than $2 million in liabilities.
D)Orin,an individual self-employed as a commodities broker who deals primarily in energy resources.

Question 45

Eve sells her motorcycle to her brother Floyd for $1,000. Twelve days later, Eve files for bankruptcy under Chapter 7.
Refer to Fact Pattern 26-1.Floyd dies while riding the cycle.Eve is Floyd's only heir.With respect to the bankruptcy estate,the inheritance is

A)exempt property.
B)part of the estate if Floyd died more than 180 days after Eve's filing.
C)part of the estate if Floyd died within 180 days after Eve's filing.
D)part of the estate if the accident was in some way Eve's fault.

Question 46

Seth files a petition for bankruptcy.Seth must include with the petition

A)proof of each creditor's claim.
B)a list of creditors and the amount of the debt owed to each.
C)all of his debit and credit cards to be disposed of by the court. d an affidavit testifying to his having read the Bankruptcy Code.

Question 47

In January, Jazz Dance Studio owes Kay, its musical director, $1,800 for cur¬rent wages, receives $700 as a down payment for dance lessons from Lora, and pays a Music, Inc., a sheet music supplier, $1,500 of $3,000 owed. In February, the studio files for bankruptcy under Chapter 7.
Refer to Fact Pattern 26-2.Based on the size of the studio's estate in bankruptcy,each of Jazz's creditors will get only 10 percent of their claims.Regarding the payment to Music,Inc.,the trustee may

A)not recover it because Music's claim has priority.
B)not recover it unless Music is an in?sider.
C)recover it as a fraudulent transfer.
D)recover it as a voidable preference.

Question 48

Ollie files a petition in bankruptcy.At the moment of filing

A)an automatic stay goes into effect.
B)Ollie's debts are discharged.
C)Ollie's petition is dismissed.
D)Ollie's property is distributed to his creditors.

Question 49

Mia's voluntary petition for bankruptcy is found to be proper.The order for relief is effective as soon as

A)Mia files the petition.
B)Mia posts a bond to cover the costs of the proceedings.
C)Mia's creditors agree to the terms.
D)the trustee collects and distributes the property of Mia's estate.

Question 50

Teona files a voluntary petition in bankruptcy for relief through a liquidation.Debts that will not be discharged include claims for

A)domestic-support obligations.
B)money to be paid for goods not delivered.
C)contributions to employee benefit plans.
D)long overdue credit-card debt.

Question 51

Ronaldo agrees to pay Simplex Cash Store a debt that is otherwise dischargeable in bankruptcy.This is

A)a reaffirmation.
B)a liquidation.
C)a reorganization.
D)a petition.

Question 52

Verna files a petition in bankruptcy in a liquidation proceeding.If the court administers the means test and concludes that Verna is abusing the bankruptcy process by filing for a liquidation,the court will most likely

A)force Verna to file for relief through an individual repayment plan.
B)discharge Verna's debts.
C)distribute Verna's property to Verna's creditors.
D)issue an automatic stay against any actions by Verna's creditors.

Question 53

Rely Credit Company loans Standard Manufacturing Company $50,000 and takes a security interest in the equipment that Standard buys with the funds and receives on July 1.Standard files for bankruptcy on July 12.Rely does not perfect its security interest before Standard files for bankruptcy.With respect to the equipment,Rely will be an unsecured creditor and the trustee of Standard's estate will

A)have priority over Rely's interest only until Rely perfects it.
B)have priority over Rely's interest only if Rely knew of the impend?ing bankruptcy.
C)have priority over Rely's interest under any circumstances.
D)not have priority over Rely's interest.

Question 54

Elise is a trustee for a federal bankruptcy court.Elise's duties include

A)collecting a debtor's property.
B)establishing priority for the payment of unsecured creditors.
C)operating a debtor's business to obtain maximum profit for creditors.
D)submitting to an examination under oath by the creditors.

Question 55

Reconstruction Building Services receives a discharge in bankruptcy,even though some creditors hold judgments on overdue debts against it and others filed actions to collect on overdue debts before the bankruptcy.Reconstruction's discharge will

A)absolve the liability of any co-debtors.
B)permit the debtor to enter into reaffirmation agreements.
C)allow the debtor to file a petition for a reorganization.
D)prohibit actions and void judgments regarding overdue debts.

Question 56

Swim & Trim Fitness Corporation wants to formulate a plan under which it pays a portion of its debts and is discharged of the remainder while continuing in business.To accomplish this goal,Swim & Trim should file a petition in bankruptcy for relief through

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)a family-farmer bankruptcy plan.

Question 57

Thirty-one days before filing a petition in bankruptcy,Frida transfers property and makes payments that favor one creditor over another.These are

A)affirmation agreements.
B)preferences.
C)secured interests.
D)unsecured debts.

Question 58

Eve sells her motorcycle to her brother Floyd for $1,000. Twelve days later, Eve files for bankruptcy under Chapter 7.
Refer to Fact Pattern 26-1.Regarding the sale of the cycle,the trustee may

A)cancel it as a fraudulent transfer.
B)cancel it as a voidable preference.
C)not cancel it because it is a sale,not a gift.
D)not cancel it,but can sue Floyd's estate for the return of the $1,000.

Question 59

In January, Jazz Dance Studio owes Kay, its musical director, $1,800 for cur¬rent wages, receives $700 as a down payment for dance lessons from Lora, and pays a Music, Inc., a sheet music supplier, $1,500 of $3,000 owed. In February, the studio files for bankruptcy under Chapter 7.
Refer to Fact Pattern 26-2.The highest priority with respect to payment of claims belongs to

A)Kay and Music,Inc.
B)Jazz Dance Studio.
C)Lora.
D)unnamed general creditors.

Question 60

Kipper files a petition in bankruptcy.Kipper's dischargeable debts include

A)domestic-support obligations.
B)student loans unless the lender would suffer undue hardship.
C)unpaid state and federal taxes.
D)unsecured credit-card debt.

Question 61

Jill believes that she should file a plan for a Chapter 13 discharge in bankruptcy.A Chapter 13 bankruptcy plan must provide for

A)the completion of all payments to all creditors within six years.
B)the payment of 100 percent of all obligations in full.
C)the surrender of all collateral to the creditors.
D)the turnover of the debtor's future income to the trustee as necessary for the execution of the plan.

Question 62

Nano Games Corporation's creditors agree to a workout with the firm.This is

A)an agreement to pay a debt dischargeable in bankruptcy.
B)an accountant's summary of a debtor's financial situation.
C)a privately negotiated adjustment of creditor-debtor relations.
D)a reorganization of corporate debts and debtors.

Question 63

To adjust debts and institute a repayment plan that is less expensive and less complicated than other options,Brunch & Lunch Café,a small business,may file a petition in bankruptcy for relief through

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)a family-farmer bankruptcy plan.

Question 64

To adjust debt and institute a repayment plan,Rolf,a family farmer,may file a petition in bankruptcy under the Bankruptcy Code's Chapter

A)1.
B)3.
C)5.
D)12.

Question 65

Suki files a reorganization plan as part of a bankruptcy proceeding under Chapter 13.The court can approve the plan by applying specific rules to the value of the property to be distributed if there is an objection to the plan by

A)an insider.
B)an unsecured creditor.
C)a preferred creditor.
D)any innocent third party.

Question 66

Gustav files a petition for bankruptcy under Chapter 13.Gustav is granted a discharge.Debts that will not be discharged include claims for

A)domestic support,fraudulently incurred debt,and student loans.
B)domestic support only.
C)fraudulently incurred debt only.
D)student loans only.

Question 67

Resources Exploitation,Inc.(REI),files a petition in bankruptcy for relief through a reorganization and assumes the role of a debtor in possession.In this role,REI is similar to

A)a creditor at a creditors' meeting.
B)a farmer after a discharge through a family-farmer bankruptcy plan.
C)a secured creditor in possession of collateral.
D)a trustee in a liquidation.

Question 68

First State Bank is a secured party on a $5,000 loan to Geoff,who owns Happy Hours,a nightclub.When Geoff experiences financial difficulty,creditors other than First State Bank petition him into involuntary bankruptcy.The value of the secured collateral has substantially decreased in value.On its sale,the debt to First State Bank is reduced to $2,500.Geoff's estate consists of $100,000 in exempt assets and $2,000 in nonexempt assets.After the bankruptcy costs and back wages to Geoff's employees are paid,nothing is left for unsecured creditors.Geoff receives a discharge in bankruptcy.Later he decides to go back into business.By selling a few exempt assets and getting a small loan,he is able to buy the Idle Inn,a small,but profitable,restaurant.Geoff goes to First State Bank for the loan.The bank claims that the balance of its secured debt was not discharged in Geoff's bankruptcy.He signs an agreement to pay First State Bank the $2,500,and the bank makes a new unsecured loan to him.Is First State Bank correct that the balance of its secured debt was not discharged in bankruptcy What is the legal effect of Geoff's agreement to pay the bank $2,500 after the discharge in bankruptcy

Question 69

Tippi believes that she needs to obtain a discharge in bankruptcy through an individual's repayment plan.This proceeding can be initiated by a filing of a petition by

A)a creditor.
B)a debtor.
C)a corporation.
D)a partnership.

Question 70

Current City (CC)is a retail seller of television sets.CC sells Dhani a $3,000 large-screen,high-definition,LED set on a retail installment security agreement in which he pays $100 down and agrees to pay the balance in equal installments.CC retains a security interest in the set,and perfects that interest by filing a financing statement centrally.Two months later,Dhani is in default on the payments to CC and is involuntarily petitioned into bankruptcy by other creditors.Discuss CC's right to repossess the TV set and whether CC has priority over the trustee in bankruptcy.

Question 71

Petunia is a debtor.Her employer Quantum Investments,Inc.,her ex-husband Rob,her alma mater State University,and Timely Credit Company are her creditors.For these parties,a petition in bankruptcy for relief through an individual's repayment plan could be filed by

A)Petunia only.
B)Petunia,her employer,or her creditors only.
C)Petunia or her creditors only.
D)Petunia's employer only.

Question 72

To adjust debt and institute a repayment plan,Charlie-who is not a corporation,a partnership,or a family farmer or fisherman-may file a petition in bankruptcy for relief through

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)a family-farmer bankruptcy plan.