Question 1

What is the main difference between Chapters 7 and 11?

Accepted Answer

The main difference between the two is that under Chapter 11 the business continues to operate, while in a Chapter 7 the business ceases operation.

Question 2

A creditor with an interest in real property is called:

Accepted Answer

A creditor with an interest in real estate is known as a mortgagee.

Question 3

Which of the following is not a requirement for the undue-hardship standard?

Accepted Answer

The lack of marketable skills is not one of the three requirements for undue hardship.

Question 4

A petition for bankruptcy that is filed by creditors against a debtor is known as:

Accepted Answer

Involuntary bankruptcy actions are filed by creditors to force the debtor into bankruptcy.

Question 5

Under Article 9 of the UCC, which of the following could not be used as collateral?

Accepted Answer

Real property is not covered under Article 9 of the UCC.

Question 6

In Ransom v. FIA Card Services, Ransom filed for Chapter 13 bankruptcy protection and listed among his living expenses the standard amount allowed in the Bankruptcy Code for car ownership costs. Ransom owned his car outright and had no car payment. FIA challenged the car deduction. The court held that Ransom could:

Accepted Answer

Ransom could not take the car ownership deduction because it was limited to debtors who have loan or lease payments to make.

Question 7

In In re Jones, Jones graduated from college and then went to law school. He graduated from law school but was unable to pass the bar exam. Over the next decade he worked various jobs before going back to school again for a master's. Jones took out student loans to pay for his education, resulting in $140,000 of debt. He filed for bankruptcy and sought to have the student loans discharged for "undue hardship." The court held that the undue-hardship standard:

Accepted Answer

The court held that Jones was a highly educated, healthy person with marketable skills who could pay back his loans. He was not attempting to seek suitable employment.

Question 8

When does an automatic stay become permanent?

Accepted Answer

An automatic stay effectively becomes permanent once the court determines the validity of the petition.

Question 9

Chapter 13 bankruptcy filings are limited to:

Accepted Answer

Only individuals who don't have any business debt may use Chapter 13.

Question 10

Nora loaned money to Susan and received a signed security agreement from Susan. To make sure she has priority as a creditor, Nora could:

Accepted Answer

Taking possession of the collateral would give Nora priority in this case.

Question 11

Which of the following is not a role of the bankruptcy trustee?

Accepted Answer

The trustee is not required to give debt counseling.

Question 12

The bankruptcy trustee is a representative of:

Accepted Answer

The trustee is a representative of the court.

Question 13

Whose only legal remedy is to bring a lawsuit against a borrower to try to recover the money loaned?

Accepted Answer

The other creditors have other legal options to recover their money. An unsecured creditor's only option is to file suit.

Question 14

Trish makes $30,000 a year. The median income for her state is $28,000. She owes over $50,000 in various debts and is considering ways to address her situation. Which of the following is not one of her options to fix her debt issues?

Accepted Answer

Trish does not meet the means test requirement and is therefore not eligible to file for Chapter 7.

Question 15

Which of the following creditors has first priority?

Accepted Answer

Administration expenses including court costs and trustee and attorney fees are first in the order of priority for unsecured creditors.

Question 16

What is the standard that an individual must meet in order to file for Chapter 7 bankruptcy?

Accepted Answer

Meeting the means test is the first requirement that an individual must meet in order to be eligible to file for Chapter 7.

Question 17

Chris wanted to get a loan from the bank, but he had bad credit. In order to get the money, he convinced Eric to cosign as a surety. Now Chris has stopped making the payments. When is Eric liable for repayment of the loan?

Accepted Answer

Eric is always liable to pay the loan because he is primarily liable as a surety.

Question 18

What does going through the process of accord and satisfaction do?

Accepted Answer

Accord and satisfaction is an attempt by a debtor to renegotiate the terms of his or her loans with the creditors in an attempt to get the creditors to agree to an amount that is less than they are owed.

Question 19

Which of the following is not a purpose of bankruptcy?

Accepted Answer

Punishment is not one of the purposes of the bankruptcy statutes.

Question 20

The reorganization plan is unique to what type of bankruptcy filing?

Accepted Answer

The reorganization plan is used by businesses in Chapter 11 filings to be able to continue operations while in bankruptcy.

Quiz 21: Creditors Rights and Bankruptcy