Deck 44: Bankruptcy

Question 1

Debts due for willful or malicious injury to a person or his property are generally dischargeable in bankruptcy.

Answer 1

False

Question 2

If the debtor has twelve (12) or more creditors, an involuntary petition to declare him bankrupt must be signed by at least five (5) creditors.

Answer 2

False

Question 3

Only secured creditors are required to file proofs of claims; unsecured creditors do not have to do so.

Answer 3

False

Question 4

Chapter 11 of the Bankruptcy Code deals with _____.

A) liquidations
B) consumer debt adjustments
C) reorganizations
D) fishing operations

Question 5

A reorganization plan under Chapter 11 of the Bankruptcy Code is essentially a:

A) supervised attempt by the state to solve a debtor's financial problems.
B) contract between a debtor and its creditors.
C) contract filed voluntarily by the creditors.
D) contract between a debtor and its trustees.

Question 6

Federal exemptions in bankruptcy include the debtor's interest, not to exceed $123,675 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence.

Question 7

A straight bankruptcy is brought under Chapter _____ of the Bankruptcy Code.

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

Question 8

A major purpose of the Bankruptcy Code is to:

A) ensure that the debtor can pick and choose between creditors.
B) protect honest debtors against the demands for payment by creditors.
C) ensure that a debtor can never be discharged of the debts he owes to the creditors.
D) protect creditors from debtors who try to extend the given time to pay their debt.

Question 9

Debts that result from liabilities for obtaining money by false pretenses or false representations are generally dischargeable in bankruptcy.

Question 10

The ten (10) classes of priority claims recognized by the Bankruptcy Code are paid before secured creditors realize on their collateral.

Question 11

The filing of a bankruptcy petition operates as an automatic stay of various forms of creditor actions against a debtor or his property.

Question 12

Domestic support obligations are generally nondischargeable in bankruptcy.

Question 13

The bankruptcy estate is composed of all the debtor's legal and equitable interests in property, including certain community property.

Question 14

Which of the following statements is true of the Bankruptcy Code?

A) It is a provision of the Uniform Commercial Code.
B) It is a federal law.
C) It is a state law.
D) It is both, a federal law as well as a state law.

Question 15

Federal exemptions in bankruptcy include the debtor's interest, not to exceed $3,775 in value, in one motor vehicle.

Question 16

If there are fewer than twelve (12) creditors, an involuntary petition must be signed by at least three (3) creditors.

Question 17

Debts due as a tax or fine to the United States or any state or local unit of government are nondischargeable in bankruptcy.

Question 18

A liquidation proceeding, traditionally called straight bankruptcy, is brought under Chapter 11 of the Bankruptcy Code.

Question 19

A voluntary petition in bankruptcy may be filed by an individual, a partnership, or a corporation.

Question 20

Chapter 7 permits compositions of debts and/or extensions of time to pay debts out of the debtor's future earnings.

Question 21

Voluntary petitions in bankruptcy may be filed by a(n) _____.

A) individual
B) insurance company
C) municipal corporation
D) bank

Question 22

Which of the following is a valid objection to a discharge in bankruptcy?

A) The debtor has more than 12 creditors and only 7 have filed for involuntary bankruptcy.
B) The debtor wants an opportunity to reorganize his or her business.
C) The debtor was unaware of embezzlement by his or her financial advisors.
D) The debtor is not able to satisfactorily explain the loss in assets.

Question 23

Under the Bankruptcy Code, exemptions are only available to _____.

A) corporations
B) loan associations
C) individual debtors
D) nonprofit organizations

Question 24

Which of the following statements concerning reaffirmation agreements is true?

A) Reaffirmation agreements are unlawful under the Bankruptcy Act.
B) Reaffirmation agreements must be made before a discharge in bankruptcy is granted.
C) A debtor cannot voluntarily pay any dischargeable obligation without entering into a reaffirmation agreement.
D) Reaffirmation agreements cannot be rescinded prior to discharge or within 60 days after filing with the court.

Question 25

People who file voluntary petitions:

A) must be insolvent.
B) must be able to allege that they have debts.
C) seek to have the debtors' assets distributed among the trustees.
D) must have 12 or more creditors.

Question 26

Debts created by larceny or embezzlement by the debtor while acting in a fiduciary capacity are _____.

A) dischargeable
B) secured
C) nondischargeable
D) unsecured

Question 27

An individual may not be granted a discharge if the individual _____.

A) has obtained one within the previous eight years
B) submits to the questioning of the creditors
C) works for a corporation
D) has obtained a loan from a secured creditor

Question 28

Which of the following statements is true of Chapter 13 of the Bankruptcy Code?

A) It encourages extensions of credit.
B) It does not help debtors to overcome their financial difficulties.
C) It reduces the amount of time allowed to repay debts.
D) It permits reductions of debts.

Question 29

If a creditor owns a debt that is provable and nondischargeable, he or she _____.

A) may participate in the distribution of the debtor's estate
B) can recover only the money provided by the bankrupt's discharge
C) must not enter into any voluntary agreement with the debtor for discharge of the debt
D) needs court approval for reaffirmation of loans

Question 30

Which of the following statements is true of bankruptcy judges?

A) If a dispute falls within a core proceeding, the bankruptcy judge can hear and determine the controversy.
B) If a dispute is not a core proceeding but involves a state law claim, then the bankruptcy judge can act as the district court judge.
C) They are considered to be units of local circuit courts.
D) They are considered to be units of the court of appeals.

Question 31

Which of the following statements is true of claims made by creditors?

A) A trustee receives only some of the defenses that a bankrupt person enjoys against claims.
B) If the debtor's property is subject to a secured claim of a creditor, that creditor has the first claim to it.
C) If a claim is provable, a creditor can participate in the distribution of the assets of the bankruptcy estate.
D) Both secured and unsecured creditors are required to file proofs of claims.

Question 32

Which of the following is true about a trustee's duties?

A) He represents the debtor in bankruptcy proceedings.
B) He examines the claims filed by various creditors.
C) He cannot have the debtor's property appraised.
D) He cannot sell the debtor's nonexempt property.

Question 33

When a debtor files a bankruptcy petition, the creditor may be relieved from an automatic stay on his actions against the debtor if:

A) the creditor can show that the bankruptcy petition does not give adequate protection to the debtor.
B) the debtor files a plan of reorganization that has a reasonable chance of being confirmed.
C) his actions are aimed at obtaining possession of the debtor's property.
D) the creditor can show that the stay jeopardizes his interest in certain property.

Question 34

The court orders relief to a creditor only if:

A) the debtor is generally not paying his or her debts as they become due.
B) a custodian is not appointed or does not take possession of the debtor's property.
C) the debtor is not involved in a case to establish paternity.
D) the creditor wants to enforce a lien against the debtor's property.

Question 35

Six months before filing for bankruptcy, Shirley sold her new car to her brother for $100 so that her creditors could not claim it. The market value of the car was $8,000 at the time of the sale. Under these circumstances, the transfer is _____.

A) voidable by the trustee because Shirley did not receive fair consideration for this transfer
B) not voidable by the trustee because the transfer occurred 6 months before Shirley filed her bankruptcy petition
C) not voidable because the transfer occurred between two relatives
D) voidable by the creditors because it was done with intent to defraud the creditors

Question 36

Which of the following payments is considered preferential?

A) Payments made in the ordinary course of business
B) Payment of monthly utility bills
C) Payment made by an insolvent debtor within 250 days of the filing of the bankruptcy petition
D) Payment to a creditor giving him a greater percentage of a preexisting debt than other similar creditors

Question 37

Which of the following statements is true of the exemptions available to bankrupt debtors?

A) They can elect to use the set of exemptions provided by either the state or federal bankruptcy law.
B) They can elect to keep some items exempted under the state law and other items under the federal law.
C) The set of exemptions is picked by the creditor's committee or the trustee.
D) The debtor can pick the exemptions of the place where the debtor was domiciled for 100 days before filing of the petition.

Question 38

Bill filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Act. Bill listed, among others, the following debts: a debt to the National Bank for $10,000 secured by his 1980 truck, which is valued at $3,500; an unsecured debt to his friend, Francis; a $500 debt to the IRS for 1989 federal income taxes; and a $500 student loan to the university which was due one year ago. In this scenario, _____.

A) the $500 debt to the IRS is a nondischargeable debt
B) Francis can claim the debt without filing a proof of claim
C) the $500 student loan to the university is a dischargeable debt
D) the bank can receive preferential payment because the debt owed to it is the highest

Question 39

A bankrupt person's estate is administered by the _____.

A) creditors
B) creditors' committee
C) trustee
D) bankruptcy court

Question 40

Involuntary petitions in straight bankruptcy can be filed against:

A) banking corporations and credit unions.
B) savings and loan associations.
C) a debtor engaged in business.
D) a nonprofit organization.

Question 41

When is a debtor allowed to void liens on his properties? What type of liens can be voided on this basis?

Question 42

Describe the creditor actions that are automatically held in abeyance when the debtor files a bankruptcy petition.

Question 43

List some types of debts that are not affected by the discharge of a bankrupt debtor.

Question 44

Who are the different unsecured creditors who receive distributions of a debtor's estate?

Question 45

Which of the following statements is true of Chapter 11 of the Bankruptcy Code?

A) It provides a proceeding whereby the debtor's financial affairs can be liquidated rather than reorganized.
B) Unlike Chapter 13, in Chapter 11 cases, the debt is predominately nonconsumer debt.
C) Petitions for Chapter 11 cases cannot be filed voluntarily by the debtor.
D) The reorganization plan is essentially a contract between a debtor and its trustees.

Question 46

In terms of Chapter 7 liquidation proceedings, explain what is meant by an involuntary petition.

Question 47

Under Chapter 13 of the Bankruptcy Act, debtors:

A) can be free of all debts that are not dischargeable under Chapter 7.
B) cannot retain more property than is exempt from bankruptcy under state law.
C) are free from garnishment of their property by creditors.
D) can pay a lesser percentage of debts owed to the creditors than in straight bankruptcy proceedings.

Question 48

Under Chapter 11 of the Bankruptcy Act, a reorganization plan:

A) must set forth how each creditor will be satisfied.
B) need not state which claims are impaired or adversely affected by the plan.
C) need not treat all creditors in a given class the same.
D) must give creditors and trustees shares in the corporation in exchange for the debt owed to them.

Question 49

A petition for Chapter 13 proceedings can be initiated by the:

A) voluntary petition of a debtor.
B) involuntary petition of creditors.
C) trustee.
D) secured creditors.

Question 50

In 1986, Chapter _____ of the Bankruptcy Code was added to target the financial problems of the family farm.

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