Deck 11: Banking, Creditors Rights, and Bankruptcy

Question 1

The federal government has enacted a mandatory "Code of Conduct for the Credit and Debit Card Industry in Canada."

Answer 1

False

Question 2

Only federally chartered Canadian banks are considered financial institutions.

Answer 2

False

Question 3

The law governing negotiable instruments is the Bills of Exchange Act.

Answer 3

True

Question 4

Credit and debit cards are bills of exchange.

Question 5

The federal government has enacted a voluntary "Code of Conduct for the Credit and Debit Card Industry in Canada."

Question 6

Electronic commercial transactions allow for a cashless business.

Question 7

Trust companies, credits, and insurance companies are considered financial institutions.

Question 8

Every business needs a relationship with a financial institution.

Question 9

Equity financing is accomplished by selling shares in a company.

Question 10

Debt financing is borrowing the money for a period of time and repaying the original amount plus interest at the end of the term.

Question 11

Credit and debit cards are "payment cards" as defined in the Payment Card Networks Act.

Question 12

It may be less expensive for a business to accept cash over a credit card.

Question 13

The federal Bills of Exchange Act does not govern the use of credit and debit cards in Canada.

Question 14

The business and financial institution have their relationship set out in an account agreement.

Question 15

Trust companies, credits, and insurance companies are not considered financial institutions.

Question 16

Payday loan companies are registered financial institutions.

Question 17

The federal Bank Act regulates all federally chartered Canadian and foreign subsidiary banks.

Question 18

A business can borrow money by entering into a loan agreement.

Question 19

Equity financing is borrowing the money for a period of time and repaying the original amount plus interest at the end of the term.

Question 20

A cheque is a bill of exchange drawn against a bank and payable on demand.

Question 21

A security interest is attached on creation of the security instrument and perfected upon either registration or possession by the creditor.

Question 22

A security agreement sets out the rights, obligations, and remedies available to both parties.

Question 23

Floating charges allow the debtor to dispose of, replace, and add to assets.

Question 24

A guarantor agrees to be responsible along with the debtor on payments to the lender.

Question 25

Equity financing is best for short-term money needs.

Question 26

A bank may lend money without security only if the loan is low risk.

Question 27

If a debtor breaches a loan agreement and there is no security, the lender will personally sue the debtor.

Question 28

To help ensure the repayment of a loan a financial institution will want security against the loan.

Question 29

A secured creditor has priority over other general creditors.

Question 30

The primary purpose of the Personal Property Security Act is to have one place for processing security interests.

Question 31

Debt financing is best for long-term capital needs.

Question 32

A creditor must register the interest in the PPSR in order to perfect their security.

Question 33

Offering an investor common voting shares in your company is a form of equity financing.

Question 34

Debt financing is best for short-term money needs.

Question 35

Debt financing is accomplished by selling shares in a company.

Question 36

A security interest is an interest in personal property that secures payment of a debt.

Question 37

Financial institutions are in the business of lending money and the debtor's ability to repay is their primary concern.

Question 38

A guarantor agrees to pay the debt of another person if that person defaults on payments to the lender.

Question 39

A guarantee must be in writing to be enforceable.

Question 40

Equity financing is best for long-term capital needs.

Question 41

Insolvency occurs when debtors are unable to meet their monthly debt obligations as they become due.

Question 42

Crowdfunding allows a business greater access to a pool of investors.

Question 43

The role of a trustee in bankruptcy is to work with the creditors to ensure payment by the debtor.

Question 44

There are various forms of creditors in a bankruptcy procedure. In priority, they are secured creditors, preferred creditors, and unsecured creditors.

Question 45

Creditors may reject a debtor's restructuring proposal and force him into bankruptcy.

Question 46

Secured creditors may take possession of the secured goods and sell them to pay the debt.

Question 47

Crowdfunding is a growing popular way to raise funds through the Internet.

Question 48

Both levels of government provide small businesses with funding and tax incentives programs.

Question 49

A person may be discharged from bankruptcy within one year.

Question 50

Where a formal proposal made by a debtor is rejected by his or her unsecured creditors, the debtor is deemed to have made an assignment in bankruptcy.

Question 51

Debtors are allowed to retain some basic assets such a clothing, furniture, and tools of the trade.

Question 52

The purpose of the Bankruptcy and Insolvency Act is to ensure creditors realize as much as possible when debtors are insolvent-cannot pay debts as they become due and 2nd to rehabilitate debtors-not a punishment.

Question 53

The role of a trustee in bankruptcy is to work with the debtor to prepare a proposal for the creditors.

Question 54

Preferred creditors may take possession of the secured goods and sell them to pay the debt.

Question 55

The purpose of the Bankruptcy and Insolvency Act is to punish debtors.

Question 56

An assignment into bankruptcy occurs when a debtor puts his property into the hands of a trustee in bankruptcy.

Question 57

A person who knows they are about to become bankrupt can transfer assets to family members to avoid those assets going to creditors.

Question 58

There are various forms of creditors in a bankruptcy procedure. In priority, they are preferred creditors, secured creditors, and unsecured creditors.

Question 59

Creditors must accept the proposal for repayment put forth by a debtor under the
Bankruptcy and Insolvency Act.

Question 60

A debtor can be forced into bankruptcy.

Question 61

A receivership involves creditors applying to the court to have a receiver appointed to control the business and property of the debtor for their benefit.

Question 62

Any Canadian corporation with outstanding issues of bonds may avail itself of the Companies' Creditors Arrangement Act, rather than make an assignment in bankruptcy under the Bankruptcy and Insolvency Act.

Question 63

Preferred creditors, secured creditors, and unsecured creditors are three basic classes of creditors in a bankruptcy procedure. What is their priority in the proceeding?

A) Secured, unsecured, and preferred
B) Preferred, secured, and unsecured
C) Preferred, unsecured, and secured
D) Secured, preferred, and unsecured

Question 64

Where an act of bankruptcy has occurred under the Bankruptcy and Insolvency Act, who may file a petition for a receiving order?

A) Any creditor owed in excess of $100
B) Any secured creditor
C) Any creditor
D) The debtor

Question 65

Which of the following is not a provincial or federally registered financial institution?

A) VanCity Savings
B) Caisse Populaire
C) Bank of Montreal
D) Money Mart

Question 66

If a court discharges the debtor from bankruptcy without conditions, the creditors may object and request that conditions be imposed.

Question 67

In which of the following is a chattel given as security by a debtor to a creditor?

A) A business person assigns his business inventory to the bank where he borrowed $25,000
B) A musician takes his guitar to a consignment shop
C) A business person borrows $25,000 from the bank and signs a personal guarantee
D) A musician pawns his electric guitar

Question 68

Which of the following statements is false?

A) bankruptcy is a provincial matter, and inspectors are appointed by creditors.
B) a bankrupt can be fined for his actions leading to bankruptcy, and a "proposal" can stave off bankruptcy.
C) a receiving order or a voluntary assignment will create a bankruptcy.
D) bankruptcy is a federal matter, and inspectors are appointed by creditors.

Question 69

You want your new company to move toward cashless transactions. You know that this method has grown enormously in Canada and you feel confident that it will work for you. Which of the following statements is false with respect to cashless transactions?

A) Credit cards are protected by the Bills of Exchange Act
B) Merchants pay a fee to a card issuer to participate in electronic payments
C) Debit cards are not protected by the Bills of Exchange Act
D) E-banking has reduced the use of cheques in Canada

Question 70

Which of the following is not part of the process necessary to create a security interest under the Personal Property Security Act?

A) Parties perfect the secured interest
B) Debtor registers the security transaction
C) Debtor provides a security interest
D) Parties enter into a security agreement

Question 71

Which of the following statements is false?

A) A guarantee must be in writing
B) A guarantor agrees to pay along with the debtor
C) A guarantor agrees to pay if debtor defaults
D) A guarantor must agree to any changes in the guarantee

Question 72

If the court discharges the debtor from bankruptcy without conditions, the creditors must accept the discharge.

Question 73

Which of the following are not negotiable instruments?

A) Cheques
B) Promissory note
C) Certified cheque
D) Bill of sale

Question 74

Which of the following is not an example of debt financing?

A) Borrowing money from a bank pursuant to a loan agreement
B) Borrowing money from a credit union pursuant to a loan agreement
C) Selling personal property pursuant to a loan agreement
D) Selling preferred shares pursuant to a loan agreement

Question 75

When a debtor voluntarily gives his property over to a trustee in bankruptcy, this is referred to as a(n)

A) act of bankruptcy
B) fraudulent preference
C) fraudulent conveyance
D) assignment into bankruptcy

Question 76

If on bankruptcy the bankrupt's cash account rests at zero, even secured creditors will receive nothing.

Question 77

Which of the following is an example of equity financing?

A) Borrowing money from a credit
B) Borrowing money from a bank
C) Selling personal property
D) Selling preferred shares