Deck 30: Bankruptcy Law

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

Only an individual can be a debtor under Chapter 7.

Answer 3

False

Question 4

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

Question 5

The adequate protection doctrine protects unsecured creditors from the actions of assertive secured creditors in bankruptcy proceedings.

Question 6

The homestead exemption under the Bankruptcy Code is unlimited.

Question 7

A bankruptcy court looks at a debtor's income to de?termine whether the debtor's petition for bankruptcy consti?tutes substantial abuse.

Question 8

If an involuntary bankruptcy proceeding is initiated in bad faith, then a court may award damages for injuries caused to the debtor's reputation.

Question 9

In most states, state law determines the amount of a debtor's property that is exempt from dis?tribution on bankruptcy.

Question 10

Concealing assets from a bankruptcy court is a crime.

Question 11

The adequate protection doctrine protects secured creditors from losing their security as a result of the automatic stay.

Question 12

Before filing for bankruptcy, a consumer-debtor must receive informa?tion about credit counseling.

Question 13

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

Question 14

Bankruptcy proceedings are held in state small-claims courts.

Question 15

Any debtor who is liable on a claim held by a creditor may file for bankruptcy.

Question 16

Bankruptcy law has one goal-to ensure equitable treatment to creditors who are competing for a debtor's assets.

Question 17

Almost any legal obligation of a debtor can constitute a creditor's claim.

Question 18

The principal duty of a trustee is to liquidate and close up the debtor's es?tate as quickly as possible.

Question 19

A debtor must be insolvent to file a petition for bankruptcy.

Question 20

The homestead exemption has been abolished under the Bankruptcy Code.

Question 21

Unsecured parties have priority over secured parties to the proceeds from the disposition of collateral on the distribution of a debtor's estate.

Question 22

Carlton files a petition in bankruptcy. One of the goals of bankruptcy law with respect to a debtor is to

A) encourage the continued use of credit to borrow funds.
B) ensure that third parties will continue to guarantee loans.
C) provide a fresh start, free from creditors' claims.
D) shield assets from creditors' claims.

Question 23

The time for repayment under an individual's Chapter 11 plan is three or five years, depending on the debtor's family income.

Question 24

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 25

The procedure and content of a Chapter 12 plan are similar to the proce?dure and content of a Chapter 13 plan.

Question 26

A discharge granted to a debtor in a bankruptcy proceeding discharges all of the debtor's debts.

Question 27

A corporate debtor must be "out of business" before it can file a bank?ruptcy petition for reorganization under Chapter 11.

Question 28

Debts based on fraud may be discharged under Chapter 13.

Question 29

The Bankruptcy Code's Chapter 12 is intended to aid charitable institutions.

Question 30

In general, the claims of all of the creditors of an estate must be satisfied before any re?maining amounts can be given to the debtor.

Question 31

All student loans are dischargeable in bankruptcy.

Question 32

Before obtaining a discharge in bankruptcy, a consumer-debtor must at?tend a consumer education course.

Question 33

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

Question 34

On a debtor's bankruptcy, a secured creditor cannot recover more on a debt than the value of the collateral covering the debt.

Question 35

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 36

It is possible, on a debtor's bankruptcy, that an unsecured creditor might receive nothing to cover a debt.

Question 37

A Chapter 11 plan is binding on confirmation and the debtor is discharged.

Question 38

A Chapter 13 plan can be initiated only by the filing of an involuntary petition.

Question 39

If the assets in a debtor's estate in bankruptcy are insufficient to pay fully all creditors, none of the creditors are paid.

Question 40

In a bankruptcy proceeding, if a discharge is denied to a debtor, the credi?tors are denied the distribution of the debtor's assets.

Question 41

Valley Ranch cannot provide its creditors with adequate protection dur?ing the automatic stay. The bankruptcy court is most likely to

A) deny Valley Ranch a discharge.
B) place the affected assets in the hands of a neutral third party.
C) remove the stay and permit the affected assets to be repossessed.
D) sell the affected assets.

Question 42

Elle is a trustee for a federal bankruptcy court. Elle'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 43

Tasty Pastries declares bankruptcy, idling Tasty's delivery vehicles. A credi?tor with a se?cured interest in the vehicles can compel Tasty to pay a cer?tain amount of money each month to offset the depreciation in the value of the vehicles. This is

A) the adequate protection doctrine.
B) the avoidance doctrine.
C) the creditor preference rule.
D) the Tasty Pastries rule.

Question 44

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

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

Question 45

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 46

Elmo files a petition in bankruptcy. If the court concludes that there are grounds for a finding of "substantial abuse," the court will most likely

A) dismiss Elmo's petition.
B) discharge Elmo's debts.
C) distribute Elmo's property to Elmo's creditors.
D) issue an automatic stay against any actions by Elmo's creditors.

Question 47

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 Ollie's creditors.

Question 48

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 49

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

A) a list of creditors and the amount of the debt owed to each only.
B) a list of creditors and the amount of the debt owed to each, a list of property, and a statement of financial affairs.
C) a list of property only. d a statement of financial affairs only.

Question 50

Fact Pattern 30-1A
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 30-1A. 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 51

Tina operates a sole proprietorship, a corporation, and a partnership. Tina wants to ob?tain relief for her individual debts and the debts of her corporation and partnership. Tina may file a petition for each under

A) Chapter 7.
B) Chapter 9.
C) Chapter 11.
D) Chapter 13.

Question 52

Mac files a petition for a discharge in bankruptcy. Mac's failure to ap?pear at a meet?ing of the creditors listed in Mac's schedules may result in Mac being

A) denied a discharge of bankruptcy.
B) fined.
C) held in contempt.
D) imprisoned.

Question 53

Fact Pattern 30-1A
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 30-1A. 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 54

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 55

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

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

Question 56

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

A) fifteen days of the creditors' meeting.
B) thirty days of the creditors' meeting.
C) sixty days of the creditors' meeting.
D) ninety days of the creditors' meeting.

Question 57

Fact Pattern 30-1B
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 30-1B. Based on the size of the studio's estate in bank?ruptcy, 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 58

Fact Pattern 30-2A
Rely Credit Company loans Standard Manufacturing Company $50,000 and takes a se?curity interest in the equipment that Standard buys with the money and receives on July 1. Standard files for bankruptcy on July 12.
Refer to Fact Pattern 30-2A. If Rely does not perfect its security inter?est before Standard files for bankruptcy, then Rely will be an unse?cured creditor and the trustee of Standard's estate can

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

Question 59

Lulu joins with other creditors to force Mikhail, a debtor, into bankruptcy. One of the goals of bankruptcy law with respect to creditors is to

A) ensure that creditors will continue to lend to insolvent debtors.
B) protect creditor assets from diminution in value.
C) provide equitable treatment in the competition for debtor assets.
D) make all debtor property available for creditor claims.

Question 60

Dona goes through an involuntary bankruptcy proceeding. An invol?un?tary bankruptcy occurs when

A) a debtor files forms designated for the purpose in a bankruptcy court.
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 61

Eli agrees to pay a debt to Financial Credit, Inc., which is otherwise dis?chargeable in bankruptcy. This is

A) a justification.
B) a novation.
C) a reaffirmation.
D) a rejection.

Question 62

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 63

Veda believes that she needs to obtain a Chapter 13 discharge in bank?ruptcy. A Chapter 13 proceeding can be initiated by a filing of a pe?tition by

A) a creditor.
B) a debtor.
C) anyone.
D) a trustee.

Question 64

Natural Resources, Inc. (NRI), files for bankruptcy under Chapter 11 and assumes the role of a debtor in possession. In this role, NRI is simi?lar to

A) a creditor at a Chapter 7 creditors' meeting.
B) a family farmer after a discharge under Chapter 12.
C) a secured creditor in possession of collateral under Chapter 13.
D) a trustee in a liquidation proceeding under Chapter 7.

Question 65

To adjust debt and institute a repayment plan, Q.T. Café, a small business, may file a petition in bankruptcy under the Bankruptcy Code's Chapter

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

Question 66

Current City (CC) is a retail seller of television sets. CC sells Dhani a $5,000 large-screen, high-definition, plasma 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 involun?tarily 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 to any proceeds from the disposal of the set.

Question 67

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.

Question 68

Paula is a debtor. Paula's employer Quality Communications, Inc., her ex-husband Rob, her alma mater State University, and Timely Credit Company are her creditors. For these parties, a repayment plan under Chapter 13 could be filed by

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

Question 69

Pola files a petition in bankruptcy. Pola's non-dischargeable debts include

A) domestic-support obligations.
B) student loans if payment would impose undue hardship.
C) unpaid loans to finance home repairs.
D) unsecured credit-card debt.

Question 70

Fact Pattern 30-2A
Rely Credit Company loans Standard Manufacturing Company $50,000 and takes a se?curity interest in the equipment that Standard buys with the money and receives on July 1. Standard files for bankruptcy on July 12.
Refer to Fact Pattern 30-2A. If Rely perfects its security interest be?fore Standard files for bankruptcy, then Rely will be a secured credi?tor and the trustee of Standard's estate can

A) invalidate Rely's interest only after Reliable perfects it.
B) invalidate Rely's interest only if Rely knew of the impend?ing bankruptcy.
C) invalidate Rely's interest under any circumstances.
D) not invalidate Rely's interest.

Question 71

Owen drops out before he completes his college education and starts his own business. Five years later, Owen files for bankruptcy under Chapter 13. Owen will obtain a discharge of all debts provided for by the Chapter 13 plan if the value of the property distributed under the plan is greater than what would have been available in a liquidation and

A) if he fails to make all payments due to events beyond his control.
B) if he stays in business for at least five years.
C) if he takes out a student loan and returns to school.
D) under no circumstances.

Question 72

To adjust debt and institute a repayment plan, Sven-who is not a corpo?ration, a partnership, or a family farmer or fisherman-may file a peti?tion in bankruptcy under the Bankruptcy Code's Chapter

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

Question 73

Gem Jewelers files a voluntary petition for bankruptcy. In listing its as?sets, Gem in?tentionally omits certain valuable stones. After Gem is granted a discharge, Hasty Catering, one of Gem's unsecured creditors whose claims were discharged, learns of the fraud. Hasty can

A) do nothing.
B) enforce its claim against Gem.
C) file an involuntary petition for bankruptcy against Gem.
D) take possession of the stones with or without a breach of the peace.

Question 74

Refer to Fact Pattern 30-1B. The highest priority belongs to

A) Kay and Music, Inc.
B) Kay only.
C) Lora only.
D) Music, Inc., only.

Question 75

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 76

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

A) a Chapter 11 bankruptcy proceeding.
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 77

Fix-It Auto Repair receives a discharge in bankruptcy, even though some creditors hold judgments on overdue debts against it and others filed ac?tions to collect on overdue debts before the bankruptcy. Fix-It's dis?charge will

A) neither stop actions nor void judgments regarding overdue debts.
B) only stop actions to collect overdue debts.
C) only void uncollected judgments on overdue debts.
D) stop actions and void judgments regarding overdue debts.

Question 78

Suki files for bankruptcy under Chapter 13. The value of her property to be distributed under the plan is more than the amount of the creditors' claims. The court can approve the plan

A) only if neither an unsecured creditor nor the trustee objects.
B) only if no unsecured creditor objects.
C) only if the trustee does not object.
D) over the objection of either an unsecured creditor or the trustee.

Question 79

To reorganize debt and continue in business, Sports & Fitness Corporation may file a petition in bankruptcy under the Bankruptcy Code's Chapter

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

Question 80

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.