Question 1

A Chapter 13 bankruptcy is also called a ___.

Accepted Answer

A Chapter 13 bankruptcy is also called a "wage earner's plan."

Question 2

_____ occurs when the debtor does not make the mortgage payments on property that is generating income. The debtor takes the money and uses it for himself and lets the real estate go into bankruptcy.

Accepted Answer

Skimming occurs when the debtor does not make the mortgage payments on property that is generating income. The debtor takes the money and uses it for himself and lets the real estate go into bankruptcy. This is often seen in the commercial real estate market.

Question 3

Which of the following types of bankruptcy is frequently referred to as the reorganization bankruptcy?

Accepted Answer

Chapter 11 is frequently referred to as the reorganization bankruptcy as it is usually used to reorganize a business.

Question 4

Individuals must undergo a means test to determine if they qualify for _____ bankruptcy.

Accepted Answer

After the 2005 amendments to the Bankruptcy Act, individuals must undergo a means test to determine if they qualify for Chapter 7 bankruptcy. Under the means test, if the debtor earns less than the median income for a family of its size in the state, the debtor can automatically file for Chapter 7 bankruptcy.

Question 5

What is a secured transaction?

Accepted Answer

The answer of What is a secured transaction?...

Question 6

The debtor must file a repayment plan within _____ days after the petition is filed for a Chapter 13 bankruptcy.

Accepted Answer

Chapter 13 bankruptcy allows individuals to reschedule secured debts and extend them over the life of the plan. The debtor must file a repayment plan within 14 days after the petition is filed.

Question 7

Which of the following statements is true about a Chapter 7 bankruptcy?

Accepted Answer

Most Chapter 7 bankruptcies are filed by individuals, but debtors qualify for Chapter 7 bankruptcy if they are an individual, a partnership, or a corporation or other business entity. After the 2005 amendments to the Bankruptcy Act, individuals must undergo a means test to determine if they qualify for Chapter 7 bankruptcy.

Question 8

This fraudulent scheme in bankruptcy occurs when a failing company moves its assets to a new business which is thriving after convincing the creditors that they should accept what the new buyer is offering for its debts. After the creditors accept pennies on the dollar for the sold company, they learn that the "new" company was a straw company set up by the principal of the failed business. Identify the fraudulent bankruptcy scheme in discussion.

Accepted Answer

Looting occurs when a failing company moves its assets to a new business which is thriving after convincing the creditors that they should accept what the new buyer is offering for its debts. After the creditors accept pennies on the dollar for the sold company, they learn that the "new" company was a straw company set up by the principal of the failed business.

Question 9

A debtor usually meets with his or her creditors in a " _____ " meeting, so named because of the section of the bankruptcy code which requires such a meeting.

Accepted Answer

A debtor usually meets with his or her creditors in a "341" meeting, so named because of the section of the bankruptcy code which requires such a meeting. If the debts are not resolved at the "341" meeting, the trustee will have the case set before the bankruptcy judge for litigation.

Question 10

Which of the following types of bankruptcies requires debtor to turn over all nonexempt property to the trustee so that it may be sold and the proceeds distributed among the unsecured creditors?

Accepted Answer

In a Chapter 7 bankruptcy, in exchange for a discharge in bankruptcy, a debtor is required to turn over all nonexempt property to the trustee so that it may be sold and the proceeds distributed among the unsecured creditors.

Question 11

Explain the following terms: Secured party, Security interest.

Accepted Answer

The answer of Explain the following terms: Secured party, Security...

Question 12

Which of the following types of bankruptcy is used by individuals with regular income to develop a plan to repay all or part of their debts and provides protection from creditors while they do so?

Accepted Answer

A Chapter 13 bankruptcy is also called a "wage earner's plan." It enables individuals with regular income to develop a plan to repay all or part of their debts and provides protection from creditors while they do so.

Question 13

What is meant by reaffirming a debt?

Accepted Answer

A debtor can voluntarily repay a debt even after it has been discharged. This is called reaffirming a debt.

Question 14

Which of the following statements is true regarding a Chapter 11 bankruptcy?

Accepted Answer

Chapter 11 is usually used to reorganize a business-a corporation, partnership, or proprietorship. In Chapter 11 bankruptcy the debtor is placed in a fiduciary relationship with the powers and rights of a trustee.

Question 15

An involuntary bankruptcy petition can be filed if:

Accepted Answer

A debtor is eligible for involuntary bankruptcy if either (1) it is generally not paying its debts, or (2) a custodian has been appointed during the last 120 days to take charge of substantially all of the debtor's property. An involuntary petition should be filed if the debtor is transferring unsecured assets to a third party for less than value.

Question 16

When a surety pays a debtor's obligation, the surety is entitled to have the co-sureties pay to the surety their proportionate share of the obligation the surety paid to the creditor. This is known as the right of ___.

Accepted Answer

When a surety pays a debtor's obligation, the surety is entitled to have the co-sureties pay to the surety their proportionate share of the obligation the surety paid to the creditor. This is known as the right of contribution arises when a surety has paid more than her share of the debt.

Question 17

Which of the following statements is true regarding a surety?

Accepted Answer

A surety makes a promise on the original agreement, becoming a party to that agreement. Therefore, a surety is obligated to pay the debt as soon as it becomes due and the debtor does not pay. Nothing further need occur to obligate the surety.

Question 18

James has taken a loan of $10,000 from a bank with Julia and Robert as his sureties. However when the money becomes due, James is unable to pay the amount. Robert, as one of James' sureties, pays the entire amount to the bank. Robert, now, has the right to receive a proportionate share of this obligation from Julia. This right is known as the right of ___.

Accepted Answer

When a surety pays a debtor's obligation, the surety is entitled to have the co-sureties pay to the surety their proportionate share of the obligation the surety paid to the creditor. This right of contribution arises when a surety has paid more than her share of the debt.

Question 19

If the surety is forced to pay off the creditor, the surety steps into the shoes of the creditor. This is called _____ and confers upon the surety all the rights the creditor has against the debtor.

Accepted Answer

If the surety is forced to pay off the creditor, the surety steps into the shoes of the creditor. This is called subrogation and confers upon the surety all the rights the creditor has against the debtor.

Question 20

A fraudulent scheme in bankruptcy involves a protracted plan to con a creditor into thinking it is dealing with an upstanding debtor. The debtor makes payments on time and lulls the creditor into shipping more and more goods. The debtor then begins missing payments and tells the creditor it is having cash flow problems. The truth is the debtor has sold the creditor's merchandise and made off with the money. This fraudulent bankruptcy scheme is known as ___.

Accepted Answer

The bustout bankruptcy scheme involves a protracted plan to con a creditor into thinking it is dealing with an upstanding debtor .

Quiz 9: Secured Transactions and Bankruptcy